Balloon Mortgages

A balloon mortgage has an interest rate that is fixed for an initial amount of time. At the end of the term, the remaining principal balance is due. At this time, the borrower has a choice to either refinance or pay off the remaining balance.

Balloon mortgages are typically amortized over 30 years, but have provisions that require the loan to be repaid in full at the end of a specified period of time, usually 5, 7, or 15 years. For example, a 15-year balloon mortgage would feature the same interest rate for the entire 15 years. The balance of the loan at the end of the 15 years would become due and payable.