The full explanation
Loans with a balloon payment usually have shorter terms and lower monthly payments that do not pay off the whole debt. If you cannot make the final payment, you may have to refinance or sell the home, or face foreclosure. With limited exceptions, a Qualified Mortgage (QM) cannot have a balloon payment.
An example
Tomás is offered a loan with low payments. On the Loan Estimate he sees “Balloon Payment: YES” and asks how much he would owe at the end and when.
You will see it in…
- The Loan Estimate, page 1 (“Balloon Payment”)
- The Closing Disclosure, under “Loan Terms”
- The promissory note, in the payment schedule
