Wasn't that a part of the problem with the real estate meltdown back in 2008? We had people getting into loans with either zero down or far less than 20% paying only the interest and not the principal for the first 5 years. They were told that real estate value only ever increases and they'll be able to refinance the loan and put the new equity into a standard loan. That worked fine until it didn't and the whole thing came crashing down. I thought I saw that 10% down mortgages are more common now, except you will have to pay for PMI until you have enough equity to cover a certain amount of the loan.
Those loans had variable interest rates and balloon payments.
They were told they could refinance before the balloon payments came due into conventional loans but when housing prices drop, you can't refinance because you owe more than it's worth. Combined with "no document" loans (aka, people lying about their income), people were buying houses that they very literally couldn't afford, not just in the "that's too much of your income" way, actually in the, "that's more than your income" way. Those were the subprime loans you hear about.
2008 would have been very different if everyone was on a conventional 30yr fixed loan.
It was even worse than that at the bottom of the market. There were people getting 'nodoc' loans where they did not prove their income. People were inclined to mark their income down as the presumed appreciation of the home value, like some sort of financial Ouroboros.
