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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

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Balloon Loan


Synonyms:huge, large payment loan
Filed Under: financial-banking, mortgages
Tags: banking, mortgage
 

Definition of balloon loan

balloon loan
1. This type of loan is not designed to be repaid in full through periodic payments at the end of the loan term. When the term ends, a balloon payments is due. This means that one larger payment is made to pay off the remaining principal.

Related Terms and Acronyms:

  • balloon mortgage   A loan that has regular monthly payments which amortize over a stated term but call for a final lump sum (balloon payment) at the end of a specified term, or maturity date, such as 10 years.
  • balloon payment   A loan instalment that is larger than the other, periodic payments and pays off the remaining principal.
  • fixed instalment   Periodic (usually monthly) payment on a loan whose sum does not vary.
  • loan term   The period specified in the promissory note for a borrower to pay a loan, such as a mortgage. Most conventional mortgages have a loan term of 5 or 10 years.
  • lump sum payment   One-time single-sum payment or payout.
  • pre-payment   Applying additional payments towards the balance of a mortgage loan.
  • principal   The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.
  • step-rate mortgage   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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