What is a balloon payment on a mortgage?

There may be other resources that also serve your needs. A balloon payment is a larger-than-usual one-time payment at the end of the loan term. If you have a mortgage with a balloon payment, your payments may be lower in the years before the balloon payment comes due, but you could owe a big amount at the end of the loan.

Can you make a balloon payment on a loan?

Most balloon loans require one large payment that pays off your remaining balance at the end of the loan term. If you’re considering a balloon loan, you need to think about whether and how you can make the balloon payment when it comes due. A balloon payment isn’t allowed in a type of loan called a Qualified Mortgage, with some limited exceptions.

Is a balloon mortgage a good idea?

But at the end of that five- or 10-year term, a lump-sum payment, equal to the remaining balance of what you owe, is due. The benefit: a lower interest rate than with longer-term fixed rate mortgages. So, you have a normal loan for a few years and then BAM! Pay up, you’re done. Who would want such a thing? A balloon mortgage may be a good idea if: