Balloon Mortgage Calculator

Calculate your monthly payments and the large balloon payment due at the end of the term. Understand the total cost and plan for the lump sum payment.

Balloon Mortgage Details

$
%
yrs

Period used to calculate monthly payment

yrs

When balloon payment is due

Ready to Calculate

Enter your balloon mortgage details and click Calculate to see your payments and balloon amount.

Related Calculators

Pro Tip

Always have a clear exit strategy before taking a balloon mortgage. Plan to sell, refinance, or save for the balloon payment well before it's due. Consider the risks if property values decline or interest rates rise.

Explore Refinance Options →

Popular Tools

How Balloon Mortgages Work

A balloon mortgage is structured differently from a standard fixed-rate mortgage. While the monthly payments are calculated as if the loan will be paid over a long amortization period (usually 30 years), the entire remaining balance comes due as a lump sum after a much shorter period, typically 5 to 7 years.

The appeal of a balloon mortgage is lower monthly payments compared to a fully amortized loan over the same short term. For example, a 7-year balloon mortgage with 30-year amortization will have much lower payments than a 7-year fully amortized loan.

However, the trade-off is significant: you must deal with the balloon payment. Since payments during the term barely reduce the principal (due to the long amortization schedule), the balloon payment is nearly as large as the original loan amount.

Balloon mortgages are most appropriate for borrowers who are confident they will sell the property, refinance, or have sufficient funds available before the balloon date. They are commonly used in commercial real estate, land contracts, and by borrowers expecting a significant future income increase.

Balloon Payment Formula

Remaining Balance (Balloon Payment)

B = P × [(1+r)n - (1+r)t] / [(1+r)n - 1]

Where:

B = Balloon payment (remaining balance)

P = Original loan amount

r = Monthly interest rate

n = Full amortization months (e.g., 360 for 30 years)

t = Balloon term months (e.g., 84 for 7 years)

Example

For a $300,000 loan at 5.5% with 7-year balloon, 30-year amortization:

  • • Monthly payment: $1,703.37 (based on 30-year schedule)
  • • After 7 years (84 payments): $141,882 paid total
  • • Principal paid: ~$38,000
  • • Balloon payment due: ~$262,000
  • • Total interest during term: ~$103,882

Frequently Asked Questions

What is a balloon mortgage?
A balloon mortgage has lower monthly payments calculated as if the loan would be paid over a long term (typically 30 years), but the entire remaining balance becomes due as a single large 'balloon' payment after a shorter period (commonly 5-7 years).
Why would someone choose a balloon mortgage?
Balloon mortgages offer lower monthly payments than a fully amortized loan for the same term. They can be useful for borrowers who expect to sell, refinance, or come into funds before the balloon payment is due. They're also common in commercial real estate.
What happens if I can't pay the balloon payment?
If you can't pay the balloon amount, you'll need to refinance the remaining balance into a new loan, sell the property, or negotiate with the lender. Some balloon mortgages include a conditional refinance option, but this isn't guaranteed.
How is the balloon payment calculated?
The balloon payment equals the remaining loan balance at the end of the balloon term. Monthly payments are calculated based on the full amortization period (e.g., 30 years), so very little principal is paid in the shorter balloon term, leaving a large remaining balance.
Are balloon mortgages risky?
Yes, they carry significant risk because you must have a plan to handle the large final payment. If property values decline or your financial situation changes, you may not be able to refinance or sell. Balloon mortgages are best for experienced borrowers with a clear exit strategy.