A balloon payment is the remaining principal balance that comes due at the end of a loan term when the amortization schedule is longer than the loan maturity. For example, a commercial loan might have a 25-year amortization but a 5-year term, meaning the entire remaining balance is due as a balloon payment after five years. The borrower must then refinance, sell the property, or pay the balance in cash. Investors must plan their exit strategy around balloon dates, as an inability to refinance due to declining property values or tightening credit markets can force a distressed sale.