A balloon loan does not have a regular amortization schedule. This means you make regular payments, then pay one giant lump sum at the end of your term. The balloon payment is the final monthly installment that pays off the rest of your mortgage balance. Many second mortgages are balloon loans.

The good news: This can be a good choice if you plan to move before the balloon payment starts. This lets you decrease the cost of your down payment and reduce the interest rate on your loan. The bad news: These are also called bullet loans, since they can be deadly to your financial situation. If you can 19t pay the full balloon payment, you could lose your home. This information was provided solely by © Copyright 2001 - 2009 One Economy Corporation