Q: What is a Balloon Payment?
A: Regulation Z requires the disclosure of a Balloon Payment on the Loan Estimate. For disclosure purposes, this refers to a payment that is more than two times a regular periodic payment. “Balloon payment” includes the payment or payments under a transaction that requires only one or two payments during the loan term.
With regard to the single and double payment transactions, the commentary provides clarification:
"2. Single and double payment transactions. The definition of a “balloon payment” under § 1026.37(b)(5) includes the payments under transactions that require only one or two payments during the loan term, even though a single payment transaction does not require regular periodic payments, and a transaction with only two scheduled payments during the loan term may not require regular periodic payments."
ADDITIONAL INFORMATION – The regulatory citation for this topic is 12 CFR 1026.37(b).