Balloon Loan

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Dictionary Says

Definition of 'Balloon Loan'

A type of loan which does not fully amortize over its term. Since it is not fully amortized, a balloon payment is required at the end of the term to repay the remaining principal balance of the loan.
Investopedia Says

Investopedia explains 'Balloon Loan'

Balloon loans can be attractive to short-term borrowers because they typically carry a lower interest rate than a loan with a longer term. However, the borrower must be aware of refinancing risk and/or the risk that the loan will reset at a higher interest rate.

Some balloon loans, such as a five-year balloon mortgages, have a reset option at the end of the five-year term that allows for a resetting of the interest rate (based on current interest rates) and a recalculation of the amortization schedule based on a remaining term. If a balloon loan does not have a reset option, or frequently even when it does, it is expected that the borrower will sell the property or refinance the loan before the end of the original loan term.
Search results for

'Balloon Loan'

  • Home-Equity Loans: The Costs

    http://www.investopedia.com/articles/pf/05/041905.asp
    ... repayment schedule caused you to repay only a small amount of the principal over
    the term of the loan, this balloon payment could be more than you can handle. ...

  • Avoiding Foreclosure Scams

    http://www.investopedia.com/articles/pf/07/foreclosure_scam.asp
    ... payment. If you can't make the entire balloon payment or get your loan
    refinanced, you may lose your home to the lender. Phony Loan ...

  • 5 Unusual Sales Taxes You Need To Avoid - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0112/5-Unusual-Sales-Taxes-You-Need-To-Avoid.aspx
    ... Hot Air Balloon Tax If you're in Kansas and in the mood to take a ride in a hot
    air balloon, beware of the state government's "amusement" tax. ...

  • 6 Reasons To Avoid Private Mortgage Insurance

    http://www.investopedia.com/articles/pf/07/avoid_pmi.asp
    ... Very often the terms of the piggyback loan are risky. Many are adjustable-rate loans,
    may contain balloon provisions, and are due in 15 or 20 years (as opposed ...

  • 5 Unusual Sales Taxes You Need To Avoid - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0112/5-Unusual-Sales-Taxes-You-Need-To-Avoid.aspx?%3e%3cA+href=
    ... Hot Air Balloon Tax If you're in Kansas and in the mood to take a ride in a hot
    air balloon, beware of the state government's "amusement" tax. ...

  • 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 ...

  • 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 ...

  • Subprime Lending: Helping Hand Or Underhanded?

    http://www.investopedia.com/articles/basics/07/subprime_basics.asp
    ... making it difficult and expensive to refinance or retire the loan prior to the end
    of its term. Some of these loans also come with balloon maturities, which ...

  • 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 ...

  • Save Money By Winterizing Your Home - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0909/Save-Money-By-Winterizing-Your-Home.aspx
    ... Or think about buying a new rubber damper for a tighter seal. You could also buy
    a fireplace chimney balloon, a plastic balloon that goes under the damper. ...

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