What is Balloon Payment?
A large lump-sum payment due at the end of a loan term when the amortization period exceeds the loan maturity.
Balloon Payment in commercial lending practice
Balloon payments are common in commercial real estate lending where a loan amortizes over 25 years but matures in 5–10 years, requiring the borrower to refinance or pay off the remaining balance at maturity. Credit memos for balloon-structured loans should document the refinancing assumptions, the borrower's likely refi options, and the bank's exposure to refi risk if interest rates rise during the term.
Related terms
Related concepts in commercial underwriting
Amortization Schedule
A table showing each periodic payment on a loan broken down into principal and interest components over the life of the loan.
Read definitionCRE (Commercial Real Estate)
Real property used for business purposes, including office, retail, industrial, multifamily (5+ units), and hospitality properties.
Read definitionDSCR (Debt Service Coverage Ratio)
The ratio of net operating income (or available cash flow) to total annual debt service, including principal and interest payments.
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How Balloon Payment shows up in AI underwriting
Aloan automates the underwriting analysis where balloon payment matters — spreading, global cash flow, credit memo generation — with source-cited audit trails on every figure. See it run on a real deal in your standardized format.
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