A balloon mortgage is a type of loan that does not fully amortize over its term, leaving a balance due at the end of the period in a balloon payment. This large, lump-sum payment can be a surprise for borrowers who are not prepared or aware of this structure.
A self-amortizing mortgage, also known as a fully amortizing mortgage, is one that retires itself through regular principal and interest payments over the life of the loan. At the end of the term, the loan balance reaches zero, meaning it is completely paid off.
A term loan is a loan with a set maturity date, typically borrowed with little to no amortization of the principal balance, requiring a significant payment at the end of the term.
