Balloon Payment
A balloon payment is a large lump sum due at the end of a loan term that has been amortized over a much longer period, common in seller carry-back and short-term financing structures.
Monthly payments are calculated as though the loan runs 20 or 30 years, but the loan actually matures in as little as 3 to 7 years — at which point the remaining balance comes due in full, usually paid off through a refinance or a sale.
Balloon structures show up often in seller-financed and carry-back notes on Northern California land and rural property, because conventional lenders are frequently unwilling to finance raw land or rural parcels over a long term.
A seller structuring a carry-back sale with a balloon payment is taking on real risk: if the buyer can't refinance in time, the seller may need to renegotiate, extend the term, or pursue foreclosure. This structure should be drafted by a real estate attorney, not assembled from a generic template.
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