A balloon mortgage is a type of home loan that does not fully amortize over its term. Instead of gradually paying off the loan in equal installments, the borrower makes regular payments for a set period—typically five to seven years.

At the end of this period, the remaining balance is due in a single lump-sum payment, known as a balloon payment. Because this final payment can be substantial, it's important for borrowers to plan ahead, either by refinancing, selling the property, or having funds available to cover the balance.