Balloon

Balloon Mortgages

Many commercial loan products have Balloon Payments. They have a note rate that is fixed for an initial period of time, and then the remaining principal balance is due at the end of the term. When the final balloon payment is due at the end of the term, the borrower basically has three choices: 1) Refinance, 2) Pay Off the balance in full, or 3) Sell the property. For example if you had a 7-year fixed commercial mortgage with an interest rate of 7.5%, your interest rate would remain constant for the full 7-year term, then at the end of 7-year term, the remaining principal balance would become due and payable in full.