What is Balloon Payment?
A balloon payment is a large, lump-sum payment due at the end of a loan term that does not fully amortize over its life.
A balloon payment is a final payment that is significantly larger than the regular monthly payments, often due because the loan was structured with a shorter term or interest-only features. Borrowers may encounter it with certain non-conforming or seller-financed loans. It requires you to pay off the remaining balance or refinance at that time. Watch for the exact due date and amount, and consider whether you will have the funds or ability to refinance. If you cannot pay, you could face default. Balloon loans can offer lower initial payments but carry refinance risk, so review the terms carefully with a mortgage professional.
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