The other major type of mortgage is the balloon loan, which was popular in the 1940s and 1950s. You pay monthly on the loan. At the end of the loan term (typically three, five, seven or 10 years), the entire remaining balance must be paid off in full. If you're going to stay in your home for seven to 10 years or more, I'd suggest a fixed-rate mortgage. If you're going to sell sooner or refinance your mortgage, then think about an ARM or hybrid ARM of some sort.
Recently, however, as some real estate markets have softened, homeowners have found out the hard way that it isn't easy to sell your home when you want to and for the price you'd like.
So give yourself enough cushion when selecting your next loan. If you think you will live in a home for only three years, you might want to choose a five-year ARM just in case.
