In one sentence
The large principal balance due at a loan's maturity when the loan does not fully amortize over its term.
The longer version
Most commercial loans do not fully pay off over their term; a balloon remains at maturity, to be refinanced, paid from a sale, or extended. The balloon is the loan's refinance risk in one number.
Underwriting stresses the balloon against future rates and values, and servicers track maturities carefully because a surprise balloon is nobody's friend.
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