Back to Glossary
Balloon Loan
January 19, 2023
A balloon loan is a certain type of loan that does not fully amortize overtime. This means that the lien holder does not set a paid-in-full repayment schedule at the outset of the loan period. The borrower is then required to, after an agreed upon period, pay a "balloon" payment in order to fully repay the remaining principal balance. Many people opt for a balloon loan as it has a short-term repayment period and typically has lower interest rates than longer terms. However, a borrower must be made aware of the risks of refinancing as the loan may reset to a higher interest rate.
Related Topics
What Is a Property Tax Lien
What Is an Adjustable Rate Mortgage (ARM)?
Navigating the Process of Mortgage Modification
What Is Non-Recourse Lending?
What Is a Short Sale?
When Is the First Mortgage Payment Due?
What Does Foreclosure Mean?
What Is a HELOC Loan?