A San Jose bankruptcy attorney defines balloon payment.

A balloon payment is a lump sum that the debtor agrees to pay, in the future, typically at the end of a loan. If the balloon payment has been agreed upon between, say, a borrower and a lender, then the balloon payment is usually due after a designated time period that is also mutually agreed upon.

In regards to a mortgage, a balloon payment is most commonly used in a commercial mortgage and sometimes used in a residential mortgage. In a residential mortgage, the balloon payment is due at the of the mortgage and, if not paid, will mostly likely result in default, and even foreclosure.

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