Balloon payment
A large final payment due at the end of a loan whose monthly payments didn't cover the full amount. Common in seller financing and some commercial loans.
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Part 1 of 4
Why a seller cares
If you carry financing for a buyer, a balloon is how you get your money back in a few years rather than thirty. If your own loan has one, its due date can set your selling timeline.
Part 2 of 4
A simple example
You sell with owner financing: $200,000 at 6% with payments sized over 30 years, and the whole balance due in 5.
| The moment | What happens |
|---|---|
| Years one to five | The buyer pays about $1,200 a month, mostly interest |
| Year five | About $186,000 comes due at once; the buyer refinances or sells |
| The buyer cannot refinance | Default, and the contract says what you can do |
A balloon is a deadline dressed as a payment.
Part 3 of 4
What people get wrong
That the balloon is a bonus. It is the balance you never collected, all at once, and the buyer's ability to pay it is the real risk.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines balloon payment in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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