Balloon Payment

Filed Under » , ,
Dictionary Says

Definition of 'Balloon Payment'

An oversized payment due at the end of a mortgage, commercial loan or other amortized loan. Because the entire loan amount is not amortized over the life of the loan, the remaining balance is due as a final repayment to the lender.

Balloon payments are often prepackaged into what are called "two-step mortgages." In this type of mortgage, the balloon payment is rolled into a new or continuing amortized mortgage at the prevailing market rates.

Balloon payments can occur within a fixed-rate or adjustable-rate mortgage (ARM).
Investopedia Says

Investopedia explains 'Balloon Payment'

The average homeowner could not make a balloon payment at the end of a mortgage, even if substantial principal payments were made over the life of the loan. Because of this, most homeowners and borrowers plan in advance to either refinance a mortgage near the balloon-payment date, or simply sell the home before the maturity date.

Balloon payments can be a big problem in a falling housing market. As house prices fall, the odds of homeowners having positive equity in their homes also drops, and they may not be able to sell their homes for the prices they anticipated.

Homeowners looking to reset their mortgages can usually do so if they have not been late on their payments, entered foreclosure or lost a substantial portion of their household income.
Search results for

'Balloon Payment '

  • Home-Equity Loans: The Costs

    http://www.investopedia.com/articles/pf/05/041905.asp
    ... Ask also if the loan is structured with a balloon payment, which requires a full
    repayment of any outstanding balance at the end of the loan term - if your ...

  • Avoiding Foreclosure Scams

    http://www.investopedia.com/articles/pf/07/foreclosure_scam.asp
    ... At the end of the term, you suddenly realize that the total amount you borrowed
    is still due in a lump sum balloon payment. If you ...

  • 6 Reasons To Avoid Private Mortgage Insurance

    http://www.investopedia.com/articles/pf/07/avoid_pmi.asp
    ... Many are adjustable-rate loans, may contain balloon provisions, and are due in 15 ...
    loan arrangement for buyers only able to put down 5% toward a down payment. ...

  • This ARM Has Teeth

    http://www.investopedia.com/articles/pf/07/arm-reset.asp
    ... Saving Your Home From Foreclosure and Are You Living Too Close To The Edge?) You
    might change the mortgage into a fixed-rate loan or negotiate a balloon payment ...

  • The Fuel That Fed The Subprime Meltdown

    http://www.investopedia.com/articles/07/subprime-overview.asp
    ... in the booming housing market, however, was that any decrease in home value would
    leave the borrower with an untenable combination of a balloon payment and a ...

  • 9 Reasons To Buy A House Now - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0511/9-Reasons-To-Buy-A-House-Now.aspx
    ... Mortgages (ARMs) are also lower now, although there are risks that interest rates
    may increase over the life of the mortgage and the balloon payment due at the ...

  • How HELOCs Can Hurt You

    http://www.investopedia.com/articles/mortgages-real-estate/11/HELOCS-can-hurt-you.asp
    ... Borrowers who choose interest-only payments will face dramatically higher monthly
    payments later on, and possibly a balloon payment at the end of the loan term ...

  • The Ins And Outs Of Seller-Financed Real Estate Deals

    http://www.investopedia.com/articles/mortgages-real-estate/10/should-you-use-seller-financing.asp
    ... Seller financing arrangements are often for a short term, such as five
    years, with a balloon payment due at the end. The idea is ...

  • Interest-Only Mortgages: Home Free Or Homeless?

    http://www.investopedia.com/articles/mortgages-real-estate/08/interest-only.asp
    ... interest. When the mortgage matures, the borrower risks owing a balloon
    payment that is greater than was originally anticipated. IO ...

  • How HELOCs Can Hurt You

    http://www.investopedia.com/articles/mortgages-real-estate/11/helocs-can-hurt-you.asp
    ... Borrowers who choose interest-only payments will face dramatically higher monthly
    payments later on, and possibly a balloon payment at the end of the loan term ...

Related Articles

Bank Rates
Product Today Last Wk
$10K MMA 0.50% 0.51%
MMA 0.45% 0.46%
6 Month CD 0.46% 0.47%
1 Year CD 0.70% 0.75%
5 Year CD 1.46% 1.46%
1 Year Jumbo CD 0.66% 0.67%
Rate data provided by Bankrate
Product Today Last Wk
$30K HELOC 4.59% 4.60%
$30K Home Equity Loan 5.74% 5.77%
$50K Home Equity Loan 5.45% 5.50%
$50K HELOC 4.24% 4.24%
$100K Home Equity Loan 5.41% 5.46%
$100K HELOC 4.13% 4.13%
Rate data provided by Bankrate
Product Today Last Wk
30 Year Fixed 3.80% 3.80%
15 Year Fixed 3.09% 3.11%
1 Year ARM 3.54% 3.53%
30 Year Fixed Jumbo 4.38% 4.38%
5/1 ARM 2.65% 2.69%
3/1 ARM 2.69% 2.69%
Rate data provided by Bankrate
Product Today Last Wk
60 Month Used Car Loan 4.51% 4.51%
48 Month Used Car Loan 4.35% 4.35%
48 Month New Car Loan 3.24% 3.24%
36 Month Used Car Loan 4.34% 4.36%
36 Month New Car Loan 3.11% 3.13%
60 Month New Car Loan 3.35% 3.34%
Rate data provided by Bankrate
Partner Links