Banks can tailor loans to any borrowers current situation. The loan appropriate for one borrower is not the right one for another. The important question is not whether a given type of loan is good or bad, but whether it fits your needs.
A balloon home loan is a type of short term loan set at a low, fixed interest rate. After the period of the loan, usually about ten years, the loan matures. The borrower must then pay the principal of the loan in a single lump sum. Balloon home loans are very short term home loans ending in a large lump sum payment. These types of loans of necessity involve some calculated risks.
Balloon home loans may not benefit the vast majority of borrowers. Because of their calculated risks, they are ideal for only a few. At the end of the loan period, any money not yet repaid must either by paid out all at once, or the loan must be refinanced. Some can benefit from this type of loan. Those who flip, or buy and resell homes, often do not intend to keep the homes as long as the term of the loan. They also often receive large amounts of money at once when their property sells. Since the fixed interest rates for balloon loans are...
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