Balloon payment mortgage

[8] That option is not necessarily automatic and may be available only if the borrower is still the owner/occupant, has no thirty-day late payments in the preceding twelve months, and has no other liens against the property.

Some countries do not allow balloon payment mortgages for residential housing: the lender then must continue the loan (the reset option is required).

With partial amortization, a balloon payment will still be required at maturity, covering the part of the loan amount still outstanding.

This approach is very common in automotive financing where the balloon payment is often calculated with respect to the value of the vehicle at the end of the financing term—so the borrower can return the vehicle in lieu of making the balloon payment.

In many cases, the intention of the borrower is to refinance the amount of the balloon payment at the final maturity date.

Because balloon mortgages can carry risk, some lenders may require a minimum 20% down payment from the borrower.