A balloon payment mortgage is a mortgage that has a final payment that is much larger than a regular payment. A mortgage is a device developed in the common law world, whereby the ownership of property is passed from one person -- the mortgagor -- to another -- the mortgagee -- in return for the loan of money. ...

Borrowers get lower rates and payments for a specific period of time, which usually is anywhere from three years to 10 years. At that point, a borrower has to pay off the principal balance in a lump sum. Under certain conditions, the mortgages can be converted to fixed-rate or adjustable-rate loans. Many borrowers either sell their homes before they get to their due dates or end up refinancing their balances into new mortgages. If you plan on either selling your home, paying it off, or refinancing it before the balloon payment is due, then this type of mortgage is good deal. A loan is a type of debt. ... Refinancing refers to applying for a secured loan intended to replace an existing loan secured by the same assets. ...

Pro

Save on mortgage costs initially -- a great option if you don't plan on living in the home long.

Con

Plans sometimes change. If yours do, you will have to pay off or refinance the balance, which takes time, effort and more closing costs. Real property in most jurisdictions is conveyed from the seller to the buyer through a contract. ...