There are several ways to pay off a balloon mortgage:
Refinance the mortgage: You can refinance your mortgage for the remaining balance before the lump sum is due. To qualify for a refi, you’ll need good credit, a steady income and a qualifying debt-to-income (DTI) ratio Sell the home: You can choose to sell the home to pay off the outstanding loan balance. Ideally, you’ll be able to sell the home, walk away with everything paid off and pocket a decent profit. But if the market is in decline, you might not sell at all, or you might sell at a loss, leaving you to figure out how to cover the remaining balance of the lump-sum payment. Save before buying a balloon mortgage: You can opt to save a lot of money before you apply for a balloon mortgage. With a cash reserve, you’ll know that you have the money to pay off the lump sum when it's due. If this option is available to you, you'll own a property and be mortgage-free in 3 – 5 years! Put money aside while waiting for your balloon mortgage deadline: You can set aside cash during the balloon mortgage loan (almost as if you were paying off a conventional mortgage) so you can afford the lump-sum payment at the end of the term. To figure out how much you have to set aside to cover your loan, divide your loan balance by the number of months you have left until the balloon payment is due