A balloon mortgage is a loan with periodic payments and a large final payment at the end of the term. The large payment is called a balloon payment.

These types of loans can have a standard 30-year payment plan with a specific date when the balloon payment will be due, typically five to seven years after the loan origination date. The borrower will have to pay the remaining balance at that time. Some borrowers may have the option to have the loan recast or reset at that time, but for those who can't get the loan refinanced, they will be required to pay the remaining loan principal amount due.