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).

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.

Investment dictionary. . 2012.

Look at other dictionaries:

  • balloon payment — n. The large payment due at the end of the term of a balloon note. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy Hackney Blackwell. 2008. balloon payment A large final paymen …   Law dictionary

  • balloon payment — (izg. balȗn péjment) m DEFINICIJA bank. 1. pojam vezan uz umjetno dizanje cijena, u prvom redu vrijednosnih papira 2. precijenjeno plaćanje ili plaćanje iznad realne vrijednosti ETIMOLOGIJA engl …   Hrvatski jezični portal

  • Balloon payment — The phrase balloon payment or bullet payment refers to one of two ways for repaying a loan; the other type is called amortizing payment or Amortization (business) .With a balloon loan , a balloon payment is paid back when the loan comes to its… …   Wikipedia

  • balloon payment — A contractually required loan payment, almost always the final payment, that is larger than the other contractually required, periodic loan payments. Results from the fact that required, periodic loan payments are too small to fully amortize the… …   Financial and business terms

  • balloon payment — The final payment of principal under a balloon note; commonly representing essentially the entire principal. See balloon mortgage balloon note …   Black's law dictionary

  • balloon payment — /bə lu:n ˌpeɪmənt/ noun the last payment, usually much larger than the others, that is made when repaying a balloon loan …   Marketing dictionary in english

  • balloon payment — Fin the final larger payment on a balloon loan …   The ultimate business dictionary

  • balloon payment — n. large lump sum paid as final payment due at the end of a loan …   English contemporary dictionary

  • Balloon Payment — Последний платеж, который гасит основной долг по ипотечному кредиту с единовременным погашением основного долга …   Ипотека. Словарь терминов

  • balloon payment — /bəˈlun peɪmənt/ (say buh loohn paymuhnt) noun a loan repayment, usually the final one, which is much larger than the other repayments, as part of a loan repayment scheme in which the borrower has low repayments in the early stages of the loan… …   Australian English dictionary

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