Glossary · FINANCING

Balloon Payment

A lump-sum principal payment due at the end of a loan term, typically after years of interest-only or amortizing payments.

A balloon payment is the large final payment that retires the remaining loan balance at the end of the term. Most seller-financed notes are structured with a balloon rather than full 30-year amortization - this gives the seller an endpoint and limits the buyer's carry period. A common structure: 25-year amortization with a 7-year balloon. Monthly payments are based on the 25-year schedule, but the full remaining balance (roughly 90% of original principal) is due in year 7. The buyer's plan must include a clear refinance or sale exit before that date.

Related Terms

Amortization

The schedule by which a loan principal is paid down over time, with each payment split between inter

Promissory Note

A signed legal document in which the borrower promises to repay a specific amount under defined term

Refinance

Replacing an existing loan with a new loan - typically to pay off a seller note, lower the rate, or

Seller Financing

A transaction where the property seller provides the loan directly, eliminating the need for a tradi

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