What is a Balloon Payment?
A balloon loan is a loan construction that typically has a relatively short repayment term, and only a fraction of the loan's principal balance is amortized over that period. The fixed monthly payments do not fully cover the loan amount and accrued interest — therefore, the borrower must make a large final payment at the end of the loan term, known as the balloon payment.
What is a Balloon Mortgage?
A balloon mortgage is a type of loan repayment option with a short term and a large lump sum payment due at the end. Since the monthly fixed payment is computed with a longer (usually 20–30 year) amortization schedule, the balloon mortgage doesn't fully amortize. Balloon mortgages are typically used by businesses for commercial real estate, renovation financing, or property expansion.
How to Calculate Balloon Payment of a Loan
First, find the monthly fixed payment using the standard amortization formula:
M = A × i × (1+i)^n / ((1+i)^n − 1)
- M — Monthly payment
- A — Loan amount (principal)
- i — Monthly interest rate (annual rate ÷ 12)
- n — Total amortization period in months
Then compute the balloon payment (remaining balance after the balloon term):
B = A × (1+i)^nb − M/i × ((1+i)^nb − 1)
- B — Balloon payment
- nb — Number of balloon loan periods (months)
Balloon Payment Example
Let's say Jack found a house priced at $100,000. He plans to move in 5 years, so he takes a balloon mortgage with a 30-year amortization period at a 7% interest rate, with the balloon payment due after 5 years.
- Loan amount: $100,000
- Amortization period: 30 years
- Balloon payment after: 5 years
- Interest rate: 7%
Result: Monthly payment ≈ $665.30, Balloon payment ≈ $94,131.59. Jack needs to sell the house for at least this amount to cover the balloon payment.
How to Use the Balloon Payment Calculator
- Select your currency (USD, RUB, EUR, and 17 more)
- Enter the loan amount (principal)
- Enter the annual interest rate (%)
- Set the amortization period — the full loan term in years (e.g. 30)
- Set the balloon payment after — how many years until the balloon is due (e.g. 5)
- Click Calculate to see the monthly payment, balloon payment, and full amortization schedule
Disclaimer
This balloon payment calculator is provided for informational and educational purposes only. All payment figures, balances, and interest amounts are estimates based on standard financial formulas. This tool is not a substitute for professional financial advice. Actual loan terms may vary depending on your lender, credit profile, and applicable regulations.
FAQs
- What happens if I can't pay the balloon payment?
- If you cannot make the balloon payment, you may need to refinance the loan, sell the asset, or negotiate new terms with the lender.
- Is a balloon mortgage risky?
- Balloon mortgages carry higher risk because the large final payment requires significant funds or refinancing. They are best suited for borrowers who plan to sell or refinance before the balloon is due.
- Can I use this as a balloon mortgage calculator?
- Yes — simply enter your mortgage amount, amortization period, interest rate, and the number of years until the balloon payment is due.
- What currencies does this calculator support?
- This calculator supports 20 world currencies, including USD (US Dollar), RUB (Russian Ruble), EUR (Euro), GBP, JPY, and more.