What is a balloon payment?
A balloon payment is a lump-sum payment, over and above the regular, minimum monthly installments due on a loan. Most loans are what is called “fully amortizing”, which is to say, the minimum monthly payment matches the loan term loan. Pay the minimum payment every month and your loan will be paid down to zero over the specified time frame. When a loan has a balloon payment, the monthly payment and loan term don’t match. At some point the balance of the loan comes due in full in a balloon payment.
In addition to our glossary, we have a library of downloadable PDFs that cover balloon payments, adjustable rate mortgages, and other mortgage fundamentals.
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