Plain-English guide. Not legal advice. A lawyer should review anything you sign.
What is a balloon payment?
The monthly payment looks small because a lump sum is waiting.
Some notes calculate the payment as if the loan lasted 30 years, then require the leftover balance after 5 or 7 years. That leftover is the balloon.
Sellers like balloons because they are not waiting decades for their money. Buyers get hurt when they cannot pay or refinance the balloon.
If you are the seller, say the balloon year in the listing. If you are the buyer, put the date on a calendar the week you start talking, not the month it is due.