A Balloon Payment is the outstanding balance that
must be paid off at the end of the term on a Home
Equity Line of Credit

Balloon Payment Definition
With a traditional home equity loan, borrowers pay only interest
during the initial life span of the loan.  Over time the borrow will still
pay interest but at the same time more of their monthly payment
goes toward chipping away at the principal.  At the end of the term
they will owe nothing. 

A balloon payment is defined as a "large, lump-sum payment"
scheduled at the end of a series of considerably smaller periodic
payments. 



Home equity lines of credit are not fully amortized; the
principal is not paid off over the life of the loan.  These home equity
lines of credit are set up for a "balloon payment".  This is when the
borrower has been paying only the interest, or some combination
of interest and principal, and when the loan term expires the
balance is due in full. 

Example:  If you borrow $15,000 and your monthly payments
for 10 years have included only interest, you must pay $15,000 at
the end of the term.  You must be prepared to make this balloon
payment by refinancing it with the lender, by obtaining a loan from
another lender, by selling your home, or by some other means.  If
you are unable to make your balloon payment, you could lose your
house. 







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