A balloon mortgage is a type of loan that requires small monthly payments for a set period, typically 5 to 7 years, followed by a large one-time payment—known as the "balloon payment"—at the end of the loan term. Unlike traditional mortgages where the loan is fully paid off over the term, balloon mortgages are structured so that the borrower repays only a portion of the principal balance through monthly installments. The remaining balance is due in full when the term ends. This type of mortgage is often used for short-term financing needs, with the expectation that the borrower will either refinance, sell the property, or have sufficient funds to cover the final balloon payment.