What is a defining characteristic of a balloon mortgage?

A balloon mortgage is characterized by the requirement that the entire remaining balance of the loan is due at the end of a specified term, which is typically shorter than the standard term for conventional mortgages, such as 30 years.

This means that while the borrower may make smaller monthly payments during the life of the loan, these payments often do not cover the full principal balance, leading to a significant payment due at maturity known as the "balloon payment." This structure is particularly appealing for borrowers who expect to refinance or sell the property before the balloon payment becomes due.

In contrast, although balloon mortgages may have lower initial payments compared to conventional loans, they do not eliminate interest charges, nor do they typically have long-term payment periods—a defining feature that distinguishes them from other mortgage types. Thus, the defining characteristic of a balloon mortgage is indeed the requirement to pay off the remaining balance at the end of its term.