Balloon Loan Calculator

How it works

The monthly payment is worked out as if the loan ran for the full amortization term, which keeps it low. But the loan matures at the balloon term, and whatever balance is left then is due in one payment: the balloon.

The balloon is simply the remaining balance on the amortization schedule after the last regular payment. Because early payments are mostly interest, the balance falls slowly: on a 30-year schedule, after 7 years you still owe around 90% of the original loan.

Most borrowers do not pay the balloon from savings; they sell the property or refinance. The risk is that rates are higher or the property is worth less when the balloon falls due. The yearly table shows how much of each year's payments went to interest and how the balance falls toward the balloon.

Formula

r = rate ÷ 12      N = amortization years × 12      k = balloon years × 12
payment = P × r × (1 + r)^N ÷ ((1 + r)^N − 1)
balloon = payment × (1 − (1 + r)^−(N − k)) ÷ r      (the present value of the payments not yet made)
interest before balloon = payment × k − (P − balloon)
total paid = payment × k + balloon

Example

A $300,000 loan at 7% amortized over 30 years but due in 7 years has a monthly payment of $1,995.91. After 84 payments the balance is still $273,442.24 (91.1% of the loan), and that is the balloon.

Over the 7 years you pay $167,656.23 in monthly payments, of which $141,098.47 is interest. With the balloon, the total paid is $441,098.47.

Assumptions and limitations

• The interest rate is fixed and payments are made monthly at the end of each month. The balloon is due together with the last regular payment.
• Fees, prepayment penalties and the cost of refinancing the balloon are not included.
• This is an estimate for planning, not financial, tax or legal advice. Check the balloon amount in your note or loan disclosure.

Frequently asked questions