balloon payment

Definition

A large, final payment due at the end of a loan term that covers the remaining principal balance. Named for its tendency to inflate your anxiety levels right before it's due.

Example Usage

Sure, the monthly payments are low, but that $50,000 balloon payment in five years might be a problem.

Origin

First used in American finance in the early 1900s, referencing the visual of an inflated balloon

Fun Fact

Balloon mortgages were common before the Great Depression and contributed to the housing crisis when borrowers couldn't refinance.

Source: Mortgage financing terminology

Related Terms

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wraparound mortgage

A secondary loan that 'wraps around' an existing mortgage, where the new lender pays the original loan. It's financial inception—a loan within a loan, typically used when someone can't refinance.

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option

In real estate and finance, a contract that gives you the right but not the obligation to buy or sell something at a predetermined price, essentially letting you call dibs with an expiration date. It's like having a golden ticket to purchase property or assets later while everyone else has to deal with current market chaos. The ultimate "let me think about it" that actually has legal teeth.

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synthetic lease

A complex financing structure that acts like a lease for accounting purposes but provides tax benefits of ownership, beloved by corporations and their accountants. It's the financial engineering equivalent of having your cake while also writing off the ingredients.

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per door

A valuation metric for multifamily properties calculated by dividing price by number of units, because apparently 'per unit' wasn't jargony enough. It's the real estate equivalent of price per ounce.

🏠 Real Estate

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highest and best

A seller's request for all interested buyers to submit their absolute top offer by a deadline, usually because multiple lowballers are circling. It's the real estate version of 'final answer' from Who Wants to Be a Millionaire.

🏠 Real Estate

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alienation clause

A mortgage provision requiring full loan repayment if the property is sold or transferred, effectively preventing you from passing your sweet 3% interest rate to the next owner. Also known as a 'due-on-sale clause' for those who prefer their contract language less sci-fi sounding.

🏠 Real Estate

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