Mortgage Dictionary

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Balloon Payment

A balloon loan is a type of short-term loan. Initially, it works like a traditional mortgage, requiring regular monthly payments of principal and interest. Then, after a period of time (usually between 3 to 10 years), it becomes 100% due. At that time, the borrower must pay the loan off in cash (referred to as the balloon payment) or refinance.

See also:   Fixed-Rate Mortgage | Adjustable-Rate Mortgage (ARM)