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Balloon Payment Calculator

Find the monthly and balloon payment of a loan.

How it is calculated

A balloon loan has small monthly payments calculated as if the loan ran for a long amortization period, but it is due in full after a shorter term. With monthly rate r = annual rate / 1200 and n = amortization years × 12, the payment is M = P·r / (1 − (1 + r)−n). After m = term years × 12 payments, the balloon is the remaining balance: B = P(1 + r)m − M·((1 + r)m − 1) / r.

The rate is an annual percentage and must be above zero. The term must be shorter than the amortization period, otherwise there is no balloon and no result is shown. Fees, insurance, taxes and any rate changes are not included, and the balloon assumes every monthly payment is made on time.

Worked example

Loan 200,000, 6% a year, amortized over 30 years, balloon due after 5 years. r = 0.06 / 12 = 0.005 and n = 360, which gives a monthly payment of $1,199.10. After 60 payments, only a small part has gone to principal, so the remaining balance is the balloon: $186,108.71, due at the end of year 5.

Try this example →

Common mistakes

  • Forgetting that the balloon is a lump sum due on the term date; you must have cash or a way to refinance.
  • Entering the balloon term in the amortization field, or the reverse, so the term is not shorter than the amortization.
  • Entering the rate as 0.06 instead of 6.
  • Assuming the monthly payment shown includes taxes or insurance; it is only principal and interest.

Sources

About this calculator

A balloon loan calculates its regular installment as if it were fully amortizing over a long term — often 25 or 30 years — while the loan actually matures much sooner, typically in 5 to 7 years. This calculator applies the standard amortization formula to find that monthly payment, then runs the amortization schedule forward to the maturity date to find the remaining principal balance, which becomes due as a single lump-sum balloon payment.

Commercial real estate lenders and sellers offering owner financing use balloon structures to keep monthly payments low for the borrower while limiting the lender's long-term interest rate exposure. Borrowers, mortgage brokers and real estate investors use this calculator to plan ahead for the balloon due date, since the loan typically needs to be refinanced or the property sold before that final payment comes due.

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