What Is a Balloon Mortgage?

By U.S. News & World Report
December 14, 2025 | 7:00 PM

For the everyday homebuyer, balloon mortgages are a relic of the past — and for good reason. This type of mortgage was widely used in the lead-up to the 2008 financial crisis, leading to strict regulations that make balloon payments incredibly uncommon in modern residential mortgage lending.

While a balloon mortgage may not be ideal for the typical borrower, it may be a good option for real estate investors who plan to fix up a property to resell it or rent it out for a profit.

Before accepting a loan with a balloon payment, make sure you know the risks and understand your options when the loan must be repaid.

[Read: Best Mortgage Lenders]

How Does a Balloon Mortgage Work?

Balloon loans require low monthly payments for five to 10 years, followed by a balloon payment, a large lump sum due at the end of the term to pay off the remaining balance.

Monthly payments are usually lower for a balloon loan than a traditional 30-year mortgage because the lender accepts interest rate risk for, say, 10 years instead of 30, says Evan Swanson, a certified financial planner and loan officer at Guild Mortgage.

“In other words, from the lender’s perspective, they are guaranteed to receive their loan amount back within 10 years,” Swanson says. “Assuming interest rates rise over the initial 10-year period, lenders are then able to re-lend the money for a higher interest rate.”

From the borrower’s perspective, the trade-off for lower monthly payments can be the substantial balloon payment. Swanson gives the example of a 30-year $100,000 loan with a 3.5% interest rate versus a 10-year balloon mortgage.

“The borrower’s monthly payment is based on the amount needed to pay the loan off over a 30-year term,” which in this case is $449.04, he says.

You will make the same monthly payment with the balloon loan, but owe a balloon payment of nearly $78,000 unless you refinance at the end of 10 years.

Note that balloon payments are not allowed for most qualified mortgages, which cannot include certain risky loan features. Most lenders don’t even offer balloon mortgages.

How Is a Balloon Loan Different From Other Home Loans?

The main difference between a balloon loan and other home loans is that the former leaves the borrower with a principal balance at the end of the term and the latter is fully repaid through amortization. The amortization process spreads out principal and interest over time to pay off debt.

Another difference is that a balloon mortgage has a much shorter term of five to 10 years compared with 30 years for a traditional mortgage.

“If you have a seven-year balloon, you will enjoy a monthly payment based on a 15- or 30-year amortization,” says Carolyn Morganbesser, assistant vice president of mortgage originations at Affinity Federal Credit Union. “But at the end of seven years, your loan is due.”

You might pay interest only each month or a portion of interest and principal, but either way, you will owe a lump sum at the end of a balloon loan.

[READ: Compare Current Mortgage Rates]

Pros and Cons of Balloon Loans

Pros

— Balloon loans can have lower interest rates than standard fixed-rate loans because balloon loans must be paid back faster, which means they can be less risky for lenders.

— Paying little to no principal translates into a low monthly payment until the balloon payment is due.

— A balloon loan may allow you to afford more house or get into a home sooner than you would have otherwise.

Cons

— The large final payment can be tens of thousands of dollars.

— If you can’t make the balloon payment, refinance or sell the home, you could lose the property to foreclosure and damage your credit.

— You will accrue little to no home equity if your monthly payments are mostly or entirely interest, and refinancing could be difficult.

Qualifying for a Balloon Loan

If your income or credit is lacking, a balloon loan may not be for you. This high-risk loan requires an excellent credit score, a large down payment and a substantial income.

Overall, the qualification process for a balloon loan is similar to the process for a traditional loan. The lender will ask for proof of income and check your debt-to-income ratio and credit to determine your ability to repay the loan.

The ability-to-repay, or ATR rule, was created by the Consumer Financial Protection Bureau in the wake of the 2008 housing crisis. It’s especially important when it comes to balloon mortgages, since lenders must verify that your income is high enough to make the final balloon payment.

How to Calculate a Balloon Mortgage Payment

When you borrow a mortgage, your lender must disclose if there is a balloon payment on page one of your loan disclosure. This is a document that you receive during the closing process that outlines your loan’s repayment terms.

If you’re not sure whether your home loan has a balloon payment, or if you forgot how much will be due and when, it’s best to look at the closing disclosure for an accurate answer. If you can’t find yours, get in touch with your lender for help.

The easiest way to estimate a balloon payment before you borrow is to use a free online balloon payment calculator available on many bank websites.

Calculators usually require home price, down payment amount, loan term and interest rate to compute your monthly payment and your balloon payment.

[Read: Best Mortgage Refinance Lenders.]

Ways to Pay Off a Balloon Loan

Ultimately, you need cash to make the final balloon payment. You have three options: Save, sell or refinance. Whatever you choose, make sure you have a repayment plan before you apply for a balloon loan.

Save: If you can, save enough money to pay the loan balance when it comes due. This is best if you earn a substantial income or expect an income increase before you make the payment.

Sell: A home will often be sold before the balloon payment is due, and the sale proceeds can be used to pay off the loan.

Refinance: If you want to keep your property, you could refinance the balloon loan by using the proceeds from a second loan to make the balloon payment. However, you’ll need to have sufficient equity in your home to refinance, which can be difficult if you’ve been making low or no-interest payments.

[SEE: Best Home Equity Loans]

Should You Get a Balloon Loan?

Balloon mortgages are relatively uncommon, and they’re not an ideal choice for most borrowers. However, it might make sense to get a balloon loan if:

— You have enough money to cover the balloon payment or are confident that you will receive a lump sum, such as a bonus or inheritance, before it is due.

— You’re seeking short-term financing and plan to sell or refinance the home before you owe the balloon payment.

— You are certain that you won’t stay in the home for long and will sell it before you have to pay the lump sum.

Balloon loans can seem appealing because of their low initial monthly payments, but they aren’t for everyone. Most borrowers today opt for fixed-rate mortgages, says Matt Woods, co-founder and CEO of Sold.com.

“Balloon loans are typically offered for higher-risk lending scenarios, where the lender doesn’t want to offer long-term financing based on the situation at hand,” Woods says.

More from U.S. News

How to Find Startup Business Loans

How Does a Condo Mortgage Work?

How Piggyback Loans Work

What Is a Balloon Mortgage? originally appeared on usnews.com

Update 12/15/25: The story was previously published at an earlier date and has been updated with new information.

Asia’s next great gourmet destination? Inside Indonesia’s fine-dining revolution

By CNN
August 11, 2026 | 5:44 AM

More than 120 years ago, Eliza Ruhamah Scidmore, National Geographic magazine’s first female writer, photographer and board member, chronicled her travels through colonial Indonesia in her book “Java: The Garden of the East.”She was particularly fascinated by a feast known as the rijsttafel (rice table), a multi-dish banquet that was served in the grand Hotel de Nederlanden in Batavia, as Jakarta was known then.Scidmore vividly recalled a “conglomerate mountain” of food, including bits of fish, duck, chicken, beef, omelettes and onions piled alongside steaks, salads, curries, chutneys, spices and tropical fruits.The sumptuous spread had something to satisfy everyone amongst the 100 or so guests that filled the grand dining hall — even the “squeamish folk, unseasoned tourists and well-starched Britons with a small sense of humor.”Like Scidmore, most early Western documentation of Indonesia’s flavors focused on the opulent colonial feast. Little else was known about the diverse and rich flavors found across the enormous archipelago, in spite of it being home to the fabled Spice Islands, which sparked a 16th- and 17th-century “spice rush” for cloves, nutmeg and mace by Portuguese, Dutch and British traders.In more recent decades, the world has become better acquainted with some of the beloved humble foods found in Indonesian homes and warungs (street-side eateries), with satay, nasi goreng and beef rendang among the most familiar dishes beloved by travelers.But now, there’s a rising number of contemporary chefs who are elevating the national cuisine on the global stage by reimagining its famous spices into fine-dining experiences, while sharing the sophisticated stories of Indonesian flavor through a different lens.Made up of thousands of islands dotted across two oceans, Indonesia is the world’s largest archipelagic country. It would be an understatement to say the country’s cuisine is wildly varied.As a result, “the existing understanding of Indonesian food culture is very shallow,” says William Wongso, an Indonesian culinary expert and author.Boasting an enviable array of regional ingredients and flavors, the country’s chefs have been working to educate international gourmets — and even locals — about the beauty of Indonesian cuisine.And Jakarta, its capital city, has become a breeding ground for the movement. Wongso compares it to the dining scenes in New York or Shanghai, which draw talent from all over their respective countries. “Everybody wants to come here to make a thing,” he says. “So people from different regions bring flavors and food cultures.”Some open humble warungs and serve their home cooking. A few look beyond recipes and focus on elements that make Indonesian cuisine unique for a wider audience, reinventing the whole experience.A modern, fine-dining blueprintEnter August, which opened in 2021 inside a gleaming skyscraper in Jakarta’s central business district.The duo behind the concept, Jakartan Hans Christian and Budi Cahyadi from the Indonesian island of Lombok, were definitely not the first people to promote Indonesian flavors — Christian emphasizes figures like Wongso, for example, who have been championing gastro-diplomacy abroad for decades.But August has spearheaded a new format and standard for the country’s fine-dining restaurants: a modern, Indonesia-inspired tasting menu operating at a world-class level of culinary execution and service.The industry has already noticed. August became one of the few Indonesian restaurants to achieve international recognition, placing 42nd on Asia’s 50 Best Restaurants 2026 and earning accolades at The Best Chef Awards.“When I came back to Jakarta, you either had classic French fine dining or very casual bistros, mostly run by expat chefs,” says Christian, who sharpened his skills in Malaysia and the United States before returning to Jakarta in 2016.“There were no locally grown chefs doing their own thing with their own roots or interpretations. For me, August is about the pride of telling our own story … and a responsibility to not only embrace our roots, but also relearn them.”Cahyadi, with more than a decade of hospitality experience in a luxury hotel, agrees. He currently helms the front of house in August’s dining room.“In Jakarta, you either had to pick a place where the food was good but the service was lousy, or a casual place where service was bad but food was decent. When I met Hans, I knew it was time for a place where food is excellent and hospitality is delivered at the exact same time,” he says.In 2019, the two started August as a private kitchen concept before turning it into the current restaurant in 2021.Inside August’s intimate dining room — warmly lit with dark wood accents and a bright, open stainless-steel kitchen at the end of the dining room — the restaurant’s two tasting menus blend familiar Indonesian flavor profiles into completely unexpected forms.Their daikon dish is inspired by the format of Japanese agedashi tofu — silken tofu coated in starch, deep-fried until golden brown and traditionally dressed in dashi sauce.August’s version is served with a cuko sauce — a sweet and sour reduction made with tamarind and palm sugar featuring a tangy umami taste.It reminds locals of eating pempek, the Indonesian fishcake. A drizzle of andaliman pepper oil, Indonesia’s version of Sichuan peppercorns, gives the dish a unique, numbing spicy kick.Another highlight features Japanese Kimendai fish cooked by pouring hot oil over the scales until it crisps up while keeping the flesh tender. It sits in a kuah garang asem (yellow sour curry sauce) from the Central Java region.The sourness comes from a native green fruit called belimbing wuluh (or bilimbi), which looks like an oblong tomato but tastes extremely acidic, while ginger flowers provide a touch of freshness.The curry base is made from a yellow bumbu — made of aromatics such as turmeric and lemongrass. Often compared with France’s mother sauces (a group of five master sauces, such as Béchamel and Hollandaise, that are said to be the foundation of classical French cooking), Indonesian bumbu are spiced sauces that take hours to caramelize and form the base of many different dishes.Christian says that August has slowly evolved over the years, with more Indonesian flavors being incorporated into his menu as the team gains confidence and the demand grows.“In the beginning, our menu leaned more towards classic European because that was my formal training. When more international guests came, they expected more Indonesian flavor,” says Christian.Now, with half of their guests coming from overseas, the team tries to find the balance carefully without being intimidating.“Finding that balance was crucial — doing modern Indonesian cooking in a way that’s exciting for locals without just putting expensive ingredients in a traditional dish. We want to start from a product or a cooking method and create something new out of that idea,” says Christian.The founders admit that Jakarta has few fine dining concepts compared to fellow Southeast Asian cities such as Kuala Lumpur, Singapore, Manila and Bangkok.“We knew we were a few years behind, but we are in progress to catch up. Over the years, the interest from people who want to learn and taste the flavor of Indonesia is growing,” says Christian. “For the past five to six years, we’ve been on a mission to prove people wrong.”It wasn’t easy. It wasn’t just about the menus, but the operation.They were the first restaurant to impose a reservation fee for diners in Jakarta. It also took a few years to educate their diners to be punctual for the tasting menu so the table could start the menu together – an often tricky feat in Jakarta traffic.But August’s success helped set new operational benchmarks for the city, proving that local diners were ready to enjoy high-end tasting menus.In the years since, Jakarta’s fine-dining community has expanded rapidly.ESA, opened in 2023, proudly offers a menu called New Jakarta Cuisine. Kindling, which opened the following year, blends Indonesian-Chinese dishes with French technique. Selera, newly opened this year in the Keraton at the Plaza hotel, emphasizes the nation’s culinary heritage with local ingredients.Outside the capital, things are changing, too, particularly in the country’s tourist hotspots. Bali, for example, has evolved to offer more than just fine resort dining and Western restaurants catering to visitors.Locavore NXT, helmed by Dutch-Indonesian duo Eelke Plasmeijer and Ray Adriansyah, serves a tasting menu that highlights local ingredients. The independent concept also has a farm, laboratory and store.Meanwhile, young, local and independent concepts are slowly increasing elsewhere in the country.Overlooking the historical Prambanan Temple and Mount Merapi, Suwatu in Yogyakarta, the royal cultural heart of Java, is an upscale hillside restaurant with a menu packed with local dishes cooked by local villagers.In Bandung, both MMBS (Mari Merangkai Bunga Seroja) and Plataran Bandung serve local Sundanese cuisine, with hyper-seasonal tasting menus featuring a creative twist.Not just about the price tagAt the same time, classic Indonesian restaurants are reexamining the stories they would like to tell.For a long time, the 1945 Restaurant inside the Fairmont Jakarta has been regarded as the city’s only high-end Indonesian restaurant in a five-star hotel.Taking over as the chef de cuisine this year, Yopi Tumeru has been determined to inject fresh ideas into the 11-year-old establishment — and he was inspired by the traditional rijsttafel concept.His vision of the legendary feast isn’t only a sumptuous buffet but an educational exploration of Indonesian cuisine.“For many years, Indonesian food was presented either as home cooking, street food or part of a hotel buffet… Our Rijsttafel was designed as a culinary journey through the archipelago. We preserve the generous and communal character of the traditional experience while refining the portions, presentation and sequence,” Tumeru says.The menu includes dishes such as wagyu beef rendang, duck leg confit with sambal madura, tuna collar rica-rica (rahang tuna), tempe nachos and es teler cheesecake — all created to shine new light onto old dishes.For chefs like Tumeru, presenting Indonesian cuisine in a haute gastronomic format isn’t just about slapping on higher price tags and using expensive ingredients.They are proudly showcasing the often undervalued Indonesian cuisine — from the ingredients, the knowledge and the labor to the cultural heritage.“Rendang, for example, is not simply beef cooked in coconut milk. It requires patience, careful control of the heat, and an understanding of how the spices develop over time,” says Tumeru, who feels chefs have a responsibility to help guests appreciate that complexity.Despite giving Indonesian cuisine an upscale makeover, all of the chefs insist their roots and hearts remain with the humble, family-run warung. They encourage diners to ask for street-food tips, which might otherwise feel intimidating without a local guide.The movement isn’t about replacing affordable neighborhood joints. It’s about broadening how the world sees Indonesian food, using fine dining as a welcoming gateway into their country’s vast culinary heritage.“There is still a mindset that Indonesian food cannot be expensive — that is not true,” says Wongso.“These high-end restaurants, if they’re doing it right, they’re quite helpful in changing people’s mindsets. Indonesian food cannot be cheap. It takes immense labor and skill. A single sauce or spice paste takes hours of balancing and preparation. You can Google many things, but you can’t Google taste.”The-CNN-Wire™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

Related Stories

CNN verifica: Trump hace numerosas afirmaciones falsas y engañosas sobre las vacunas y el autismo

Markets are still trying to figure out the Fed’s next move

Wisconsin weighs a democratic socialist governor and other key races to watch in Tuesday’s primaries

As Chicago rethinks its monuments, an artist surrounds George Washington with ‘Other Washingtons’

Un cohete chino que transportaba un satélite explota segundos después de su lanzamiento