Balloon Mortgage Loan

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The concept of balloon mortgage loan is very new concept in the Indian mortgage industry. The concept of balloon mortgage loan is a type of 'one-time payment' scheme. The balloon mortgage loan is similar to a fixed-rate mortgage scheme and it has a much shorter payment term. Further, the monthly payment structure is also smaller than the fixed-rate mortgage. The main feature of the Indian balloon mortgage loan is payment of a hefty amount (i.e. balloon amount) at the end of the loan's term. The advantages of the balloon mortgage loan is low monthly payment, the quantum of which is much more lower than the typical fixed-rate mortgage loan. The main disadvantage of the balloon mortgage loan is the balloon payment at the end of the loan term. Further, the problem doubles up, if the loan requires refinance of the payment through the main loan provider.

The age old trend of mortgaging housing properties only is changing at a fast pace. Today, the Indian mortgage loans industry has spread its wing and offering modern mortgage loan products like balloon mortgage loan, and one can but such loan for physical properties like the following -
  • Amusement parks
  • Bowling centers
  • Casinos
  • Auto care centers
  • Auto dealerships
  • Car washes
  • Parking garage
  • Truck terminal
  • Conveniences stores
  • Distribution centers
  • Fitness centers
  • Franchises
  • Funeral homes
  • Gas stations
  • Golf courses
  • Malls
  • Retail (anchored, single tenant, unanchored)
  • Mobile home arks
  • Movie theaters
  • Resort
  • Restaurants
  • Hotels
  • Motels
  • Hospitals
  • Medical clinics
  • Medical offices
  • Nursing homes
  • Rehabilitation facilities
  • Skilled nursing facility
  • Special purpose property
  • Child care centers
  • Independent living facilities
  • Mixed use properties
  • Single family
  • Offices (multi-tenant, single tenant)
  • Warehouse
  • Industrial parks
  • Industrial buildings
  • Land developments
  • Mini warehouses
  • Office buildings
  • Outlet centers
  • Educational institutions
  • Training institutions
The mortgage loans market in India is consistently registering 20-50 % growth on year-on-year basis, from the year 2000 onwards. The size of this industry is estimated to be US $ 18 billion. Huge real estate requirements and its subsequent development has fueled tremendous growth of this industry. Previously, the activities of the Indian mortgage industry was limited to financing of housing and real estate properties only but today it has extended to all possible immovable property mortgage funding business. The market leaders in organized Indian mortgage loans sector are housing finance companies like LIC Housing Finance, HDFC, ICICI Home Finance etc. These companies are devising innovative products especially tailor made to suit the requirements of Indian buyers.

According to sources, the estimated size of the mortgage loans industry in India account only for 25% of the total housing investment in India and the majority of these mortgage loans were being facilitated by the Indian housing finance companies. Presently, the commercial banks, both national and foreign banks along with cooperative banks and other non-banking financial companies have a paltry share in the aforesaid industry. Recent trends suggests that these institutions are also registering steady growth with the introduction of modern and innovative mortgage loan instruments like the balloon mortgage loan.

Last Updated on 5/26/2011