Balloon Mortgage

A balloon mortgage or balloon payment mortgage is a type of balloon loan which is secured by real estate.

Balloon mortgages are repaid in part by amortization payments throughout the mortgage term. The remainder of the mortgage is amortized via a lump-sum repayment at the end of the mortgage term. Typically, balloon mortgages must be amortized in full.

Lenders normally charge lower interest rates for balloon mortgages than they do for standard mortgages. Affordability requirements for balloon mortgages are also normally less strict than those applicable to regular mortgages.

Balloon mortgages are commonly used in high-growth real estate markets because they allow investors to purchase a property at exceptionally low interest rates in order to resell the home at a profit before amortizing the mortgage at the end of the loan term.

Balloon mortgages are not widely offered in Switzerland.

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