They require fixed - rate interest in the first few years of the loan followed by variable rate interest after that. (investopedia.com)
This happens because a balloon loan requires interest - only payments for the first few years of the loan. (easychoicelenders.com)
Also, interest - only borrowers can face a marked step - up in their required repayments once they come off the interest - only period (after the first few years of the loan term). (rba.gov.au)