Balloon loans can be attractive to short-term borrowers because they typically carry a lower interest rate than a loan with a longer term. However, the borrower must be aware of refinancing risk and/or the risk that the loan will reset at a higher interest rate.
Some balloon loans, such as a five-year balloon mortgages, have a reset option at the end of the five-year term that allows for a resetting of the interest rate (based on current interest rates) and a recalculation of the amortization schedule based on a remaining term. If a balloon loan does not have a reset option, or frequently even when it does, it is expected that the borrower will sell the property or refinance the loan before the end of the original loan term.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
balloon loan — A loan for which the final payment, larger than all of the previous, regularly scheduled payments, is due in a lump sum before the loan is fully amortized. The final payment is called a balloon payment. American Banker Glossary * * * balloon loan … Financial and business terms
balloon loan — Fin a loan repaid in regular installments with a single larger final payment … The ultimate business dictionary
Balloon Loan — («Шаровой» кредит) кредит с единовременной выплатой значительной части основной суммы долга. Ипотечный кредит, предусматривющий погашение основного долга по кредиту в виде одноразового платежа, осуществляемого в заранее оговоренное время, или в… … Ипотека. Словарь терминов
balloon — bal·loon adj: being or having a final installment that is much larger than preceding ones in an installment or term loan a balloon payment ◇ In contrast to an amortized loan, a balloon loan is generally repaid in periodic payments of interest and … Law dictionary
Balloon payment — The phrase balloon payment or bullet payment refers to one of two ways for repaying a loan; the other type is called amortizing payment or Amortization (business) .With a balloon loan , a balloon payment is paid back when the loan comes to its… … Wikipedia
loan — money lent at interest.A lender makes a loan with the idea that it will be paid back as agreed and that interest will be paid for the use of the money. Glossary of Business Terms Temporary borrowing of a sum of money. If you borrow $1 million you … Financial and business terms
loan — Fin borrowing either by a business or a consumer where the amount borrowed is repaid according to an agreed schedule at an agreed interest rate, typically by regular installments over a set period of years. However, the principal may be repayable … The ultimate business dictionary
balloon payment — /bə lu:n ˌpeɪmənt/ noun the last payment, usually much larger than the others, that is made when repaying a balloon loan … Marketing dictionary in english
balloon payment — Fin the final larger payment on a balloon loan … The ultimate business dictionary
balloon mortgage — see mortgage Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. balloon mortgage n … Law dictionary