Balloon mortgage

Some loans are built so the regular payments never finish the debt. At the stated end date, a remaining principal amount—the balloon—comes due. Borrowers sometimes refinance or sell before that date. Those are later choices, not part of this definition.

Consumer and GSE glossaries describe a balloon as a mortgage that is not fully amortizing and requires a large payment at maturity.

A balloon is easy to confuse with a short fixed-rate term. The distinguishing feature is the unpaid balance still due at the end.

• Loan term