reference
glossary.
25 terms
definition
A balloon payment is a large, lump-sum payment due at the end of a loan term that is significantly larger than the regular monthly payments. This type of payment structure typically occurs with balloon mortgages where borrowers make smaller payments throughout the loan term. The balloon payment represents the remaining principal balance that must be paid in full at maturity.
examples
- —After five years of $800 monthly payments, Sarah faced a balloon payment of $120,000 to satisfy her mortgage.
- —The commercial property loan required a balloon payment of $2 million at the end of the seven-year term.
- —Many borrowers refinance their loans before the balloon payment becomes due to avoid the large lump sum.