Balloon Mortgage

Definition - What does Balloon Mortgage mean?

A balloon mortgage is a mortgage that has a requirement that a large payment is due at the end of the repayment period to pay off the remaining balance. So, a balloon mortgage may have a fixed monthly payment with a set interest rate for eight years, and then the rest of the balance is due in the eighth year.

In the context of the law, balloon mortgage holders who do not pay their payments on time can face foreclosure.

Justipedia explains Balloon Mortgage

A balloon mortgage is a different type of mortgage that is on the market for homeowners to purchase. They may be a good choice for people who expect to have an increase in income in the future. For example, a balloon mortgage may be a good choice for a man who is attending law school at night after work, and expects to have a major increase in salary after he graduates in three or four years.

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