What Is a Balloon Mortgage, and How Does It Work
- By Jim Blackburn
- on
- 100 first time home buyer FAQs
1. A Balloon Mortgage Starts With Low Payments—Then Ends With One Big Lump Sum
With a balloon loan, you typically get a low monthly payment for 5 to 7 years. But when that period ends, you owe the entire remaining loan balance all at once.
That large final amount is called the “balloon payment”
It’s due whether or not you’re ready
Most buyers sell or refinance before the balloon payment is due
It’s like renting your mortgage for a while… until the full tab comes due.
2. It Can Work—If You Have a Solid Exit Plan
Balloon loans can make sense if:
You plan to sell the home before the balloon period ends You’re expecting a large financial change—like a big bonus or inheritance You’re confident you can refinance before the balloon hits
But beware: if your financial situation or interest rates change, refinancing may not be an option—and you could be left scrambling for a large sum of money.
3. Balloon Mortgages Are High-Risk for Most First-Time Buyers
Unless you have a very strong reason and a very strong plan, balloon mortgages are not recommended for most new buyers.
They carry more uncertainty and long-term risk You could lose your home if you can’t make the final payment Safer loan types (like fixed or ARM) offer more stability and flexibility
When in doubt, choose the mortgage that gives you peace of mind, not stress.
Considering a Balloon Loan? Let’s Look at Safer, Smarter Alternatives
Download our free “Loan Types Explained” Guide — includes balloon vs. fixed vs. ARM comparisons
Chat live now to ask if a balloon loan is right for your goals
Schedule a call with a Stairway Mortgage advisor for a custom loan strategy that won’t leave you guessing
At Stairway Mortgage, we believe in smart leverage—not risky shortcuts.
Let’s build a plan that’s built to last.
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