balloon mortgage

Definition

Type of mortgage loan that requires the borrower to pay a large sum of money at the time of maturity. The borrower typically pays regular payments on the loan until the loan reaches maturity. A lot of borrowers accept this type of loan with the goal of selling the property before the maturity date and avoiding the balloon payment. A balloon mortgage is not ideal for borrowers unless they are positive that they will have the money to pay the balloon payment at the time of maturity.

Use balloon mortgage in a sentence

You may want to take on a balloon mortgage if you think that will be an easier way to pay it all off.

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The balloon mortgage was sub optimal but the homeowner seemed ecstatic, perhaps because he was not aware of the predatory relationship.

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Balloon mortgages are most appealing to individuals and entities who are in the business of purchasing and re-selling real estate; otherwise, buyers face a potentially burdensome payment that may be beyond their capacity at the time of loan maturity.

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