Balloon mortgage
A loan with smaller payments for a set term followed by one large final payment of the remaining balance. Borrowers usually plan to sell or refinance before it comes due.
Also called: balloon loan, balloon payment
Related terms
Paying off a loan through regular payments over a set term. Early payments go mostly to interest; later ones go mostly to principal. An amortization schedule shows that split for every payment.
A loan where payments cover only interest for a set period, so the balance does not go down. After that period, payments jump to include principal or the balance comes due.
An arrangement where the seller lends the buyer some or all of the purchase price, and the buyer pays the seller over time. Terms are negotiated, often with a balloon payment, and the seller usually holds a lien until paid.
Replacing your current mortgage with a new one, usually to get a lower rate, change the term, or drop mortgage insurance. It comes with new closing costs, so the savings need to outweigh them.
A short-term loan that uses the equity in your current home to buy the next one before the first sells. It costs more than a regular mortgage and is repaid when the old home sells.