Balloon payment mortgage

A balloon payment mortgage is a mortgage that has a final payment that is much larger than a regular payment. Typically, monthly payments are set based on a 30-year amortization schedule, but the term of the loan is from 3 to 10 years, after which time, the remaining principal balance is due in full.

Under certain conditions, the mortgages can be converted to fixed-rate or adjustable-rate loans. Many borrowers either sell their homes before they get to their due dates or end up refinancing their balances into new mortgages.