I am a little confused at your question.
Are you saying that you have a balloon payment coming up, and if you don't make the balloon payment, your monthly payment is increasing?
Either way, you are facing the same problems many other home buyers who purchased in the last three years are facing. You have a couple of options:
1. Contact the lender and see if they will modify your loan. You are going to have to explain how it is that you qualified for the loan in the first place, and now you will be unable to afford the payment. Sometimes this is called a hardship letter. Be prepared to back up what you state in the letter. The stronger case you make, the better your chances.
2. You might end up having to sell. The most important thing is to find out your options. I suggest talking with a Realtor experienced in short sales and have them walk you through your options. None of this is pleasant, but better to know where you stand and what might happen now.
Lenders say that most owners in trouble never respond to their phone calls or letters. If you want to stay in your home, then make a strong case for why it would be in the lender's best interest to work with you. This is where your Realtor comes in.
Post if you need more help.