What is Balloon Mortgage?

Question: What is Balloon Mortgage?

Answer: A mortgage that has level monthly payments that would fully amortize it over a stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified term.

An example of a balloon payment mortgage is the 7-year Balloon Mortgage, which features monthly payments based on a 30-year amortization. After 7 years, the brorrower has to pay the lump-sum balance of the mortgage.

Balloon Mortgages are common for commericial real estat than in residential real estate.

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