A Balloon Mortgage is a short-term, fixed-rate loan with low payments for a set number of years and a large balloon payment for the remainder of the principal due at the end of the term. For example: A 3 Year balloon amortized over 30 years is a loan with payments for principal and interest based on a 30 year loan.  These payments are made for three years at which time the loan matures and the remaining principal balance is due.