"And a balloon loan could force you to sell the property or to refinance at a bad time."

Balloon loans often have a provision entitling the borrower to extend the loan for the remaining 25 years, with certain conditions.

It also gave a highly specific breakdown on loans, including scheduled principal repayments and outstanding balloon loans.

A five-year balloon loan that must be refinanced at the end of the term means the borrower never fully repays the loan.

Because the borrower is using the entire amount of principal borrowed throughout the entire loan term, flat rate calculations are accurate when applied to balloon loans.

Billionaires in Russia and Ukraine have been particularly hard hit by lenders seeking repayment on balloon loans in order to shore up their own balance sheets.

Balloon Mortgage Question: I bought a co-op apartment about four years ago and at the time I took a balloon loan from the sponsor of the co-op.

Even though the co-op could have chosen a fully amortizing loan, it elected to take a 10-year balloon loan instead - which means that the unpaid principal is due in full after 10 years.

In the U.S. a partial amortization or balloon loan is one where the amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding capital balance is due at some point short of that term.

But in a predatory scenario, while a balloon loan seems affordable at first because monthly payments tend to be low, many borrowers are shocked when the entire principal comes due and - unable to pay it - they are served with a foreclosure notice.

The most common way of describing a balloon loan uses the terminology X due in Y, where X is the number of years over which the loan is amortized, and Y is the year in which the principal balance is due.

In a predatory scenario, "while a balloon loan might look affordable at first because monthly payments tend to be low," Ms. Ludwig said, "many borrowers come forward after they have been served with a foreclosure notice and they had no idea that there was a balloon provision in their loan."