A balloon payment is a payoff on your loan. It means that there is a one-time payment for whatever the remaining balance is on your loan. The interest rate does not come into play other than what interest you owe to that point in time for the length of time you have had the loan. At the inception of the loan, there is a pre-determined point in time that the loan balance is due and payable in full. Sometimes there is no interest or principal paid prior to the balloon payment coming due.

All these types of loans have terms and conditions that are negotiated at the time the loan is made to the borrower.

This information is from my husband, who has been a real estate broker for 30 years. He just happens to be sitting next to me at the computer right now.