Balloon Mortgage: Definition, Who It’s For, Pros and Cons

A balloon mortgage gives you low payments for a while, but then you have to pay it off in a lump sum.

Some or all of the mortgage lenders featured on our site are advertising partners of NerdWallet, but this does not influence our evaluations, lender star ratings or the order in which lenders are listed on the page. Our opinions are our own. Here is a list of our partners.

Updated · 1 min read
Profile photo of Holden Lewis
Written by Holden Lewis
Senior Writer/Spokesperson
Profile photo of Mary Makarushka
Edited by Mary Makarushka
Assigning Editor
Fact Checked

A balloon mortgage is a home loan with low monthly payments for a few years, after which you must pay the remaining balance in a lump sum. You get a lower interest rate than with longer-term fixed-rate mortgages, in exchange for having to pay off the outstanding loan amount after a set period, often between five and 10 years.

Balloon loans are rare because they're considered risky.

Who a balloon mortgage is for

A balloon mortgage may be suitable if:

  • You're certain that you will sell the property before the balloon payment comes due.

  • You're sure that you'll receive a lump sum at least equal to the balloon payment before it comes due. That could be something like a bonus or series of annual bonuses, an inheritance or the sale of another property.

  • You'll refinance the loan before the end of the term.

ADVERTISEMENT

Mortgage loans from our partners

New American Funding - PURCHASE logo
Check Rate

on New American Funding

New American Funding

4.5

NerdWallet rating 
New American Funding - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
500

Min. down payment 
3.5%

Check Rate

on New American Funding

Rocket Mortgage - PURCHASE logo
Check Rate

on Rocket Mortgage

Rocket Mortgage

5.0

NerdWallet rating 
Rocket Mortgage - PURCHASE logo

5.0

NerdWallet rating 
Min. credit score 
580

Min. down payment 
3.5%

Check Rate

on Rocket Mortgage

Veterans United - PURCHASE logo
Check Rate

on Veterans United

Veterans United

4.5

NerdWallet rating 
Veterans United - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
620

Min. down payment 
0%

Check Rate

on Veterans United

ADVERTISEMENT

Mortgage loans from our partners

New American Funding - PURCHASE logo
Check Rate

on New American Funding

New American Funding

4.5

NerdWallet rating 
New American Funding - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
500

Min. down payment 
3.5%

Check Rate

on New American Funding

Rocket Mortgage - PURCHASE logo
Check Rate

on Rocket Mortgage

Rocket Mortgage

5.0

NerdWallet rating 
Rocket Mortgage - PURCHASE logo

5.0

NerdWallet rating 
Min. credit score 
580

Min. down payment 
3.5%

Check Rate

on Rocket Mortgage

Veterans United - PURCHASE logo
Check Rate

on Veterans United

Veterans United

4.5

NerdWallet rating 
Veterans United - PURCHASE logo

4.5

NerdWallet rating 
Min. credit score 
620

Min. down payment 
0%

Check Rate

on Veterans United