Definition: A mortgage whose scheduled installment payments reduce principal but leave an unpaid balance at the end of the loan term.
Example
Payments are calculated on a 30-year amortization schedule, but the loan matures in five years with the remaining balance due.
Keep the distinction clear
The remaining amount is a balloon payment. Partial amortization is different from negative amortization, in which unpaid interest can increase the balance.
Related terms
Amortized Mortgage · Balloon Payment · Negative Amortization
Keep studying
References: CFPB: balloon payments
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