Balloon Payment Calculator
See the lump sum left at the end of a balloon loan, plus the monthly payment and interest paid before it comes due.
What it does
A balloon loan keeps the monthly payment low by spreading the principal over a longer schedule than the loan actually lasts. A mortgage might be amortized over 30 years but come due after 5 or 7 years. The borrower pays the 30-year payment, then owes the remaining balance as one large final payment.
That final payment is the balloon. It is not a prepayment penalty and it is not extra interest. It is the part of the original principal that the smaller payments have not yet covered. The tool shows the balloon, the payment, the principal repaid, and the interest paid before the balloon date.
Balloon loans can fit a short holding period, a business with a known exit, or a bridge to a permanent loan. They carry refinancing risk. If property values fall, rates rise, or income drops, the borrower may not be able to refinance or sell in time. A balloon mortgage that cannot be paid can lead to foreclosure.
The math is ordinary amortization with two dates. The payment is set as if the loan runs to the end of the amortization term. The balance is then calculated at the earlier balloon date. Changing either date changes both the payment and the balloon, so it helps to compare a few combinations before signing.
How to use
- Enter the amount borrowed, before any down payment.
- Enter the fixed interest rate on the note.
- Set the amortization term used to calculate the monthly payment.
- Set the year the balloon comes due.
- Read the balloon first, then check the monthly payment and the principal repaid.
- Try a shorter amortization or an earlier balloon to see how much balance remains.
Formula
- P
- Original loan amount, in dollars.
- r
- Monthly interest rate, annual rate divided by 1200.
- n
- Amortization term in months.
- k
- Number of payments made before the balloon, in months.
- A
- Monthly principal and interest payment.
The payment is calculated on the full amortization term even though the loan ends earlier. At a zero percent rate the payment is P / n and the balance is P minus the payments made. The tool assumes fixed rates, equal payments, and no negative amortization.
Worked example
Example: $250,000 at 6.5% with a 30-year schedule and a 5-year balloon
Loan $250,000, rate 6.5%, amortization 30 years, balloon after 5 years.
- Monthly rate: 6.5 / 1200 = 0.0054167. Amortization months: 30 x 12 = 360.
- Payment: 250,000 x 0.0054167 / (1 - 1.0054167^-360) = $1,580.17.
- Balloon month growth factor: 1.0054167^60 = 1.38285.
- Balance: 250,000 x 1.38285 - 1,580.17 x (1.38285 - 1) / 0.0054167 = $234,027.44.
- Principal paid: 250,000 - 234,027.44 = $15,972.56.
- Interest paid: 1,580.1701 x 60 - 15,972.5564 = $78,837.65.
Reference table
| Loan and rate | Schedule | Monthly payment | Balloon balance |
|---|---|---|---|
| $250,000 at 6.5% | 30 years, due after 5 | $1,580.17 | $234,027.44 |
| $300,000 at 7% | 30 years, due after 7 | $1,995.91 | $273,442.24 |
| $40,000 at 5% | 5 years, due after 3 | $754.85 | $17,205.96 |
| $100,000 at 6% | 15 years, due after 15 | $843.86 | $0.00 |
Limits
- Assumes a fixed rate and equal monthly payments for the whole term.
- Does not model interest-only periods, negative amortization, or variable rates.
- Excludes closing costs, prepayment penalties, and escrow items.
- Assumes the borrower can pay or refinance the balloon on the due date.
Common mistakes
- Budgeting for the monthly payment and forgetting the balloon.
- Assuming a refinance will be available at the same rate or on the same terms.
- Confusing the balloon with a down payment or a closing cost.
- Using the balloon date as the amortization term, which understates the remaining balance.
- Ignoring a prepayment penalty that applies when the balloon is refinanced.
Try it yourself
Quick checks. Answers sit tucked under each question.
$300,000 at 7% on a 30-year schedule with a balloon after 7 years?
Payment $1,995.91. Balloon $273,442.24, principal paid $26,557.76, interest paid $141,098.47.
$40,000 at 5% on a 5-year schedule with a balloon after 3 years?
Payment $754.85. Balloon $17,205.96, principal paid $22,794.04, interest paid $4,380.54.
$100,000 at 6% on a 15-year schedule with the balloon at the end?
Payment $843.86. Principal paid $100,000.00, interest paid $51,894.23. The loan is fully paid, so the balloon is $0.00.
Questions
What is a balloon payment?
A large final payment that clears the balance left when a loan ends before its amortization schedule is complete.
Is a balloon loan the same as an interest-only loan?
No. An interest-only loan pays no principal for a set period. A balloon loan pays principal every month on a longer schedule, then requires the rest at the end.
Why is the monthly payment lower?
Because the payment spreads the principal over more months than the loan actually lasts. The unpaid part becomes the balloon.
What happens if I cannot pay the balloon?
You may need to refinance, sell the asset, or use savings. If none of those work, the lender can pursue collection or foreclosure, depending on the loan.
Can I pay extra before the balloon?
Usually yes, unless the note has a prepayment penalty. Extra principal lowers the balloon dollar for dollar.
Is the balloon amount the same as the remaining loan balance?
Yes. It is the unpaid principal at the balloon date. Interest that accrues after that date is separate.
Sources
- Consumer Financial Protection Bureau: What is a balloon payment?
- Consumer Financial Protection Bureau: How lenders calculate monthly payments