A balloon loan is an option you may have when you’re buying a home in Aspen – but what is it, and why do people use them?
What is a Balloon Loan?
A balloon loan is a kind of loan that doesn’t fully amortize over its lifetime. At the end of the loan, a balloon payment is required – and that balloon payment has to cover the remaining principal balance.
They’re often a bit attractive to short-term borrowers, including investors, because they often have lower interest rates than those with longer terms.
Sometimes these balloon loans have “reset” options. At the end of the period of the loan, the borrower has the option to reset the interest rate based on what’s happening on the market that day.
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