Mortgage Glossary
Balloon Payment
Defined by Onias Derilus, Mortgage Capital · NMLS# 1859012 · Florida licensed mortgage broker
A balloon payment is a large lump-sum payoff due at the end of a short-term loan whose monthly payments were too small to retire the full balance.
What Balloon Payment means
Balloon loans usually carry payments calculated on a 30-year schedule but mature in five to seven years, leaving most of the principal owed at the end. Borrowers must refinance, sell, or pay the balloon in cash.
Florida example
A Florida investor takes a seven-year balloon on a $300,000 property with payments based on 30-year amortization. At year seven, roughly $265,000 comes due at once. If they can't refinance, they risk default, so an exit plan is essential.
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