Your four options
- Refinance. A new loan pays off the balloon. This is what most borrowers do, and the only option that lets you keep the property without a large cash outlay.
- Sell. Sale proceeds pay off the loan. This works if you were planning to exit anyway, but a forced sale on a deadline weakens your negotiating position.
- Pay it off. Pay the balance from cash or other assets.
- Extend. Ask the current lender for more time. Expect an extension fee (often 0.25–1% of the balance), possibly a higher rate, and conditions such as a paydown. Lenders are not obliged to agree.
Refinancing the balloon
A refinance lender will look at the property’s current value (appraisal), its income (for rental and commercial property, debt service coverage of usually 1.20–1.25x), your credit and experience, and the loan-to-value of the new loan (typically up to 75–80%). Use the remaining balance calculator to get the exact balloon amount, then check the new loan against the property’s value and income. If the property has gained value, a cash-out refinance can pay off the balloon and free up equity at the same time.
Timeline
- 9–12 months before: confirm the maturity date and payoff amount, check prepayment terms, update rent roll and financials.
- 6–9 months before: request refinance quotes and pick a lender.
- 3–5 months before: appraisal, inspections and title in progress.
- 1–2 months before: final approval and closing.
If you are already inside 90 days, contact a lender immediately and talk to your current lender about a short extension in parallel.
If the property no longer qualifies
Higher rates or lower income can mean the new loan is smaller than the balloon. Options include bringing cash to closing, a lender with more flexible coverage or leverage limits, a short-term bridge loan while you raise income or finish leasing, or a negotiated paydown and extension with the current lender. Private and bridge lenders exist for exactly this situation.