Balloon Mortgage

Balloon Mortgage – A type of mortgage loan that is not completely amortized over the term of the loan; the balance of which is made in one final payment called a balloon payment.

  • Example: Buyers who anticipate real estate values to rise can bet on this using a balloon mortgage. They keep their payments low because the loan is not fully amortizing, but then they have to pay the large lump balance back at the end of the loan. If property values fell drastically, they may own the lender a substantial amount of money.
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