Common on commercial and bridge loans: 5- or 10-year term, 25- or 30-year amortization, with the unpaid balance due at maturity. You refinance or sell before the balloon.
Loan Mechanics
Balloon Payment
A large lump-sum principal payment due at the end of a loan whose payments were amortized over a longer schedule.
More in Loan Mechanics
- DSCR (Debt Service Coverage Ratio)— The ratio of a property's net operating income to its debt payments — a 1.25 DSCR means th…
- LTV (Loan-to-Value)— Loan amount divided by the property's appraised value, expressed as a percent.
- LTC (Loan-to-Cost)— Loan amount divided by total project cost (purchase + rehab).
- ARV (After-Repair Value)— The projected appraised value of a property after planned renovations are complete.
- DTI (Debt-to-Income Ratio)— Your total monthly debt payments divided by gross monthly income.
- APR (Annual Percentage Rate)— The all-in yearly cost of a loan, including interest rate plus most fees.