Balloon Loan Calculator

Calculate payments for a balloon loan, including the regular monthly payment and the large lump-sum balloon payment due at maturity.

Balloon Loan Details

$
%
yrs

Payment calculation basis

yrs

When lump sum is due

Enter your balloon loan details and click "Calculate" to see your payments.

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Pro Tip

If you have a balloon loan, start planning for the balloon payment at least 12-18 months before it is due. Research refinance options early and build savings as a backup. Do not wait until the last minute.

Try the Refinance Calculator →

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Understanding Balloon Loans

A balloon loan is a type of loan where you make regular monthly payments based on a longer amortization period, but the remaining balance comes due as a lump-sum "balloon" payment at a specified date before the loan would fully amortize. For example, a 7-year balloon with a 30-year amortization means you make payments as if the loan were for 30 years, but the remaining balance is due after 7 years.

Balloon loans offer lower monthly payments than fully amortizing loans of the same term because the payments are calculated over a longer period. However, the borrower must be prepared to make a large payment at the end, typically by refinancing, selling the property, or paying from savings.

These loans are common in commercial real estate, construction lending, and certain mortgage products. They carry risk because you must be able to refinance or pay the balloon when it comes due. If market conditions change or your financial situation deteriorates, the balloon payment can become a serious burden.

Balloon Payment Formula

Balloon = P × [(1+r)n − (1+r)t] / [(1+r)n − 1]

Where:

P = Original loan amount

r = Monthly interest rate

n = Total months in amortization period

t = Months until balloon payment is due

Example

$200,000 loan, 30-year amortization, 7-year balloon at 6.5%:

  • • Monthly payment (based on 30 years): $1,264.14
  • • Balance after 7 years (84 payments): ~$181,126
  • • Principal paid in 7 years: ~$18,874
  • • Total interest during payment period: ~$87,234

Frequently Asked Questions

What happens when the balloon payment is due?
You must pay the remaining balance in full. Most borrowers refinance into a new loan, sell the property, or pay from savings. If you cannot make the payment, you may face default.
Why would someone choose a balloon loan?
Balloon loans offer lower monthly payments, which can be attractive for short-term ownership, investors who plan to sell before the balloon, or borrowers who expect higher income in the future. They are also common for commercial properties.
Are balloon loans risky?
Yes, balloon loans carry refinancing risk. If interest rates rise, property values fall, or your credit deteriorates, you may not be able to refinance on favorable terms when the balloon comes due.
How is the monthly payment calculated?
The monthly payment is calculated as if the loan were fully amortizing over the longer period (e.g., 30 years), even though the remaining balance must be paid off at the balloon date (e.g., 7 years).