Balloon Mortgage
A balloon mortgage usually has an interest rate that doesn't change over the term of the loan like a fixed rate mortgage does. However, the loan term is shorter than the term used to calculate the monthly payment. For example, a balloon loan may have monthly payments that are calculated over a 30 year term but a loan term of 5 years. This means that monthly payments will be made for 5 years and the balance due must then be paid in one lump sum payment, sometimes called a "balloon payment".

When the balloon payment becomes due and the loan must be paid in full it is typical to refinance the mortgage.
 
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