Should you refinance your balloon loan?

If you have a balloon loan, it may be a good idea to refinance before it comes due. A balloon requires a lump sum to be paid all at once at the end of the loan term. It is common to have balloon on a second mortgage. If you will owe a large sum of money and you can't afford to pay that at once, refinancing into a fixed rate loan will keep you from making that payment. If you have a balloon loan and don't want to refinance, you can start paying extra every month towards the principal to avoid a lump sum due in the future.