Balloon Mortgage

Definition

  • This type of loan requires the borrower to make regular monthly payments which amortize over a specified term, but at the end of that term a final payment or large lump sum (balloon payment) must be made to pay off the remaining principal. The typical term for a balloon loan is 10 year.

Synonyms
loan, huge, large

Related Terms and Acronyms

  • Amortization Definition,
    • Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
  • Balloon Loan Definition,
    • A loan in which the payments aren't set up to repay the loan in full by the end of the term. At the end comes the balloon payment -- one that is larger than the other, periodic payments and pays off the remaining principal.
  • Balloon Payment Definition,
    • A loan instalment that is larger than the other, periodic payments and pays off the remaining principal.
  • Mortgage (mtg) Abbreviation, Important,
    • A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
  • Principal and Interest (PI, P&I) Acronym,
    • Acronym for the elements of a mortgage payment: principal and interest.
  • Step-rate Mortgage Definition, Important,
    • A fixed-rate home loan on which payments are lower at the beginning, typically for two years, and which then rise.
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