A balloon payment mortgage is a mortgage that has a final payment that is much larger than a regular payment.

Borrowers get lower rates and payments for a specific period of time, which usually is anywhere from three years to 10 years. At that point, a borrower has to pay off the principal balance in a lump sum. Under certain conditions, the mortgages can be converted to fixed-rate or adjustable-rate loans . Many borrowers either sell their homes before they get to their due dates or end up refinancing their balances into new mortgages. If you plan on either selling your home, paying it off, or refinancing it before the balloon payment is due, then this type of mortgage is good deal.

Pro Save on mortgage costs initially -- a great option if you don't plan on living in the home long.

Con Plans sometimes change. If yours do, you will have to pay off or refinance the balance, which takes time, effort and more closing costs.