What Is A Balloon Payment Mortgage?
The other term for a balloon payment mortgage is a partially amortized loan. Balloon payment mortgage is when your liability or obligation is only partially amortized, leaving the rest to be paid upon the completion of the term. Because the initial interest rates and monthly payments are lower, a balloon payment mortgage is paid off with one large payment at the end of the loan term. Balloon payment mortgages are called such because borrowers who are on this type of loan are usually set up for a “balloon” payment at the end of their loan term. In most other loans, monthly payments do not only pay off the interest but also chip away at the principal amount – the original amount owed. Thus at the end of each loan term where balloon payment mortgage is applied, no money is owed. With balloon payment mortgages however, the monthly payment only comprises of interest or a combination of interest plus a small amount for the principal. No matter the case, when the balloon payment mortgage term
