ConverterHub

Balloon Loan Calculator

Enter the loan amount, rate, the balloon (due) term, and the amortization term to find the payment and balloon.

How it is calculated

With monthly rate r = annual rate / 100 / 12, the payment is set as if the loan ran for the full amortization term: PMT = L·r / (1 − (1+r)−N), where L is the loan amount and N the amortization months. You then pay that amount only for the balloon term of B months. The balloon is the balance still owed after those payments: L·(1+r)B − PMT·((1+r)B − 1)/r. At a 0% rate the tool uses L/N for the payment and subtracts it linearly. The amortization months must be at least the balloon months. Fees, insurance and taxes are not included.

Worked example

A 200,000 loan at 6% a year is amortized over 360 months but comes due after 60. The monthly rate is 0.5%, and the payment on a 360-month schedule is $1,199.10. Over 60 months you pay 1,199.10 × 60, shown as $71,946.06. Most of that is interest, so the balance falls only to $186,108.71, which is the final balloon payment due at month 60.

Try this example →

Common mistakes

  • Entering years instead of months. The balloon and amortization fields are in months, so a 5-year balloon on a 30-year schedule is 60 and 360.
  • Setting the amortization shorter than the balloon term. This is not valid and returns no result; the schedule must be at least as long as the balloon term.
  • Expecting a big drop in principal. Early payments are mostly interest, so after 5 years of a 30-year schedule only a small part of the loan has been repaid.
  • Treating the monthly payment as the whole cost. The balloon due at the end is far larger than any single payment and needs cash or refinancing.
  • Ignoring fees. Closing costs, insurance and taxes are not in the figures.

Sources

About this calculator

A balloon loan is amortized over a longer schedule — say 30 years — to keep the monthly payment low, but the loan actually comes due much earlier, often in 5 to 7 years, at which point the entire remaining balance is owed as a single large balloon payment.

Borrowers typically plan to refinance or sell the asset before the balloon date rather than pay it off in cash, which makes the size of that final payment the number that matters most. This calculator uses the loan amount, rate, and amortization term to compute the regular monthly payment, then finds the remaining principal balance at the shorter balloon (due) term to show exactly how large that final payment will be.

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