A large lump-sum payment due at the end of a loan term, covering the remaining principal balance all at once.
Full Definition
Some mortgage products are structured with lower monthly payments for a set period, followed by a single large balloon payment at maturity. For example, a 7-year balloon mortgage might have monthly payments calculated on a 30-year amortization schedule, but after 7 years the entire remaining balance comes due at once. Borrowers typically refinance or sell the property before the balloon date. Balloon mortgages can offer lower initial rates but carry significant risk if rates rise or the borrower can't refinance when the balloon payment is due. They're far less common after the 2008 financial crisis but still appear in some commercial and non-QM products.
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