Balloon Payment Calculator

Calculate your regular loan payments and the balloon payment due at the end of the loan term. Balloon loans have payments based on a longer amortization period but require a large final payment when the term ends.

Regular Payment = P * [r(1+r)^n] / [(1+r)^n - 1], where P = loan amount, r = periodic rate, n = total amortization payments. Balloon Payment = P * [(1+r)^n - (1+r)^p] / [(1+r)^n - 1], where p = payments made before balloon.
Example: $200,000 loan at 6.5% with 5-year term but 30-year amortization. Monthly payment = $1,264 (as if 30-year loan). After 5 years (60 payments), balloon payment due = $186,108. You've only paid $13,892 in principal despite paying $75,840 total.

What is a balloon payment?

A balloon payment is a large lump sum payment due at the end of a loan term. The loan has smaller regular payments throughout the term, then requires a substantial final payment to pay off the remaining balance. Common with commercial loans, some auto loans, and certain mortgages.

Why would I choose a balloon loan?

Balloon loans offer lower monthly payments during the loan term because you're not fully amortizing the loan. This can improve cash flow short-term. They're useful if you plan to sell the asset, refinance, or expect a large payment (bonus, inheritance) before the balloon is due.

What are the risks of a balloon payment loan?

The biggest risk is not having funds for the balloon payment when due. If you can't pay, refinance, or sell the asset, you could face default and lose the asset. Market conditions or credit changes might prevent refinancing. Always have a solid plan for the balloon payment.

Can I refinance before the balloon payment is due?

Yes, many borrowers refinance into a traditional fully-amortized loan before the balloon payment is due. However, refinancing depends on your credit, income, and market conditions at that time. Don't assume you'll qualify - interest rates and lending standards can change.

How is the balloon payment calculated?

The balloon payment is the remaining loan balance after making all scheduled payments. Payments are typically calculated as if the loan fully amortizes over a longer period (e.g., 30 years), but the loan term is much shorter (e.g., 5 years), leaving a large balance due.

Are balloon payments common for mortgages?

Balloon mortgages are less common for primary residences but used in commercial real estate and some jumbo loans. The 2008 financial crisis reduced their popularity. They require careful planning and are best for sophisticated borrowers with clear exit strategies.