What Is Balloon Amortization?

The phrase balloon payment (also called bullet payment) is used to refer to a system of loan repayment; the other way of repaying a loan is typically known as amortizing payment or simply, amortization. Amortization refers to the dissemination of one lump-sum cash flow instead into a number of smaller cash flow installments, which is established by an amortization schedule.

Balloon amortization is also the name of a software which offers users a balloon payment schedule, demonstrating possible effects of cutting down initial payments and moreover making a fat payment at the conclusion of the balloon period or possibly refinancing the loan. It is typically aimed financial planners who can use it to counsel clients on a manner of mortgage payment.

What does it mean when your loan contract says balloon payment, but gives no specific amount?