What is a defining feature of a balloon mortgage?

A defining feature of a balloon mortgage is that it involves payments made over a specified period, typically at a lower rate, with the full remaining balance due at the end of the term. This structure allows borrowers to enjoy lower monthly payments initially, often making it an attractive option for those who may anticipate selling the property or refinancing before the balloon payment comes due.

This design serves several purposes: it often makes housing more affordable upfront and can appeal to those who expect their financial situation to improve or who plan to sell their property before the significant payment arrives. Borrowers need to carefully consider their financial plans since they will need to be prepared for the larger final payment at term's end.