In a partially amortized mortgage, what is an example of a payment that might remain due at the end of the loan term?

In a partially amortized mortgage, a balloon payment is the large sum that remains due at the end of the loan term after making smaller, regular payments throughout the mortgage period. This type of mortgage does not fully amortize the loan over its term, meaning that the payments made during the duration of the loan do not cover the total principal amount borrowed. As a result, borrowers face the obligation of paying a significant balance, or balloon payment, in one lump sum when the loan matures.

This payment typically reflects the remaining principal balance because the smaller monthly payments usually cover only a portion of the total principal, alongside interest. The balloon payment structure is often appealing to borrowers who anticipate that they will refinance or sell the property before the final payment is due, but it does require planning to address the larger payment when it comes due.