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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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50% - Moderately

Balloon Mortgage


Synonyms:huge, large, loan
Filed Under: mortgages
Tags: mortgage
 

Definition of balloon mortgage

balloon mortgage
1. This type of loan requires the borrower to make regular monthly payments which amortize over a specified term, but at the end of that term a final payment or large lump sum (balloon payment) must be made to pay off the remaining principal. The typical term for a balloon loan is 10 year.

Related Terms and Acronyms:

  • amortization   Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
  • balloon loan   A loan in which the payments aren't set up to repay the loan in full by the end of the term. At the end comes the balloon payment -- one that is larger than the other, periodic payments and pays off the remaining principal.
  • balloon payment   A loan instalment that is larger than the other, periodic payments and pays off the remaining principal.
  • mortgage (mtg)   A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
  • principal and interest (P&I, PI)   Acronym for the elements of a mortgage payment: principal and 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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Mortgage Amortization Calculator
An amortization is the amount of time scheduled to completely pay off a loan, and the amortization length you choose is important in shaping how much you'll end up paying for your home. While the Government of Canada's national housing agency caps the amortization period for high-ratio mortgages at 25 years, and that is the most popular amortization length in Canada, amortizations can range anywhere from 5 to 30 years for uninsured mortgages. Try our easy to use mortgage calculator to see how changing the amortization length affects your loan payments.
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