A mortgage loan in which the monthly payments are not large enough to repay the loan by the end of the term. So at the end of the term, the remaining balance comes due in a single large payment.
A mortgage where the monthly payments are based on a 30-year schedule, but the entire mortgage becomes due at the end of a set term, normally five to seven years.
A relatively short-term, fixed-rate loan that ends in one large final lump sum payment of the remaining principal. Borrowers may be able to refinance the loan when the balloon payment comes due.