When we bought our house back in 2006, we got an 80/20 loan. Basically, we had 100% financing and put no money down when we made the purchase. We had one loan for 80% of our house's cost, and we had another loan for the remaining 20%. The first loan was a traditional 30-year fixed-rate mortgage. The second loan was a 15-year fixed-rate balloon mortgage.
Balloon loans are kind of hard to understand, but I'll try to explain it. Basically, the mortgage company figures out how much to charge a homeowner per month by dividing the loan payments/interest up over the course of 30 years (just like a regular mortgage). The big difference is that at the end of the mortgage's term (15 years in our case), the remaining amount of the loan will be due in a lump sum. So even though the payments were set-up like a 30 years mortgage, the homeowner only has 15 years to pay off the loan. In order to get the loan paid off, he/she would have to make extra payments or try to refinance at the end of the loan's term. These loans are kind of risky, because if uninformed homeowners only pay the minimum each month, they will owe a HUGE amount at end of the loan's term. And if the house has decreased in value, they won't be able to refinance.
I hated our 15 year balloon loan, and worried endlessly about paying it off. For the first few years that we lived here, we were strapped for cash and could only afford the minimum payments on the loan. I worried that we would lose our house when the 15 year period was over.
In 2009, we started aggressively paying off our debt. When all of our credit cards were paid off, we started throwing all of that money toward the balloon loan. On Monday, we made our last payment on the balloon loan. We paid it off 8 years early! I am so proud of us. We officially only have one mortgage on our house, and it is beyond awesome. I am so freaking excited! A huge weight has been lifted off of us.