A Balloon Mortgage is a mortgage that begins with a period of monthly mortgage payments, typically 10-15 years. At the end of that period a large balloon payment of the remaining balance is due.

Borrowers who take out a mortgage with a balloon payment at the end need to make sure that they can come up with the payment, usually via refinancing or selling the property. Balloon payments are more common on commercial real estate transactions than they are on residential real estate mortgages.