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Yes, a balloon payment is a legal debt instrument. A lender can intentionally structure a loan for a borrower who wants to pay a series of low monthly payments followed by a single large payment of principal at the end of the loan.
Balloon payments are not great for the every day buyer. Essentially deferring a one off large payment in the future on the hope that you will be disciplined and have the funds available when the time comes. Suggest having a higher loan payment (gonna need to save the money anyway) and forego the balloon.
A balloon note is a loan that has an initial period of low, interest-only or interest-and-principal payments, followed by a large lump-sum payment at the end of the term. Five- and 10-year terms are standard. Balloon notes can be ideal for short-term borrowers.
A balloon note is a loan that has an initial period of low, interest-only or interest-and-principal payments, followed by a large lump-sum payment at the end of the term. Five- and 10-year terms are standard. Balloon notes can be ideal for short-term borrowers. Balloon notes can be risky for lenders and borrowers.
With a balloon payment (or residual), youll pay instalments for a percentage of the loan amount over a term, and at the end of that term, you agree to pay another amount over the remaining term.
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A balloon payment could make sense for homeowners who plan to live in the property for a few years and sell it before the lump sum is due. However, if the homes value decreases during that time, you may have to make up the difference between your sales price and outstanding mortgage balance.

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