Balloon Mortgage
From Open Risk Manual
Definition
Balloon Mortgage is a Mortgage requiring monthly payments of principal and interest in which the period over which the loan is amortized is greater than the term of the mortgage.
Principal and interest payments are made until maturity of the mortgage, at which time full payment of the remaining principal, the balloon payment, is due.
Example
A five-year balloon mortgage, with scheduled payments to amortize the loan in 30 years, will see part (but not all) of the principal paid down through year five, at maturity.
