A balloon loan can be an excellent option for many borrowers. A balloon loan is usually rather short, with a term of three to five years, but the payment is based on a term of up to 15 years. There is, however, a risk to consider. At the end of your loan term, you will need to pay off your outstanding balance. This usually means you must refinance your loan or convert the balloon loan to a traditional loan at the current interest rates. Show
 Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues. Created by Tibor Pal, PhD candidate Reviewed by Dominik Czernia, PhD and Jack Bowater Based on research by “Financial and Insurance Formulas“ (2006) Last updated: Jul 10, 2022 The balloon payment calculator is a loan calculator with a balloon payment that helps you to estimate the monthly fixed instalment and the final balloon payment of a given balloon loan construction. Moreover, you can check the monthly or yearly balances in the amortization schedule with the balloon payment at the end of the repayment term given. Read on to learn what is a balloon payment, how to calculate balloon payment and to see a balloon payment example as well. Also, we explain what is balloon mortgage so you can use the tool as a balloon mortgage calculator as well! What is a balloon payment definition?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. In other words, the fixed payments due monthly don't cover the loan amount and the accrued interest. Therefore, the borrower is required to make a large final payment at the end of the loan term, which refers to 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 of the loan. As we mentioned, the balloon payment is the final payment which pays off the remaining balance after the last period of the monthly payment. Since the monthly fixed payment is computed with a more extended, usually 20-30 year amortization schedule, the balloon mortgage doesn't fully amortize. Since balloon mortgages expect a considerable amount of money after a short time, it typically relates to businesses which can afford such a loan construction. Such loans are, for example, commercial real estate loans which allow investments for the renovation of buildings or the purchasing of a commercial property for expansion. How to calculate balloon payment of a loan?As a first step, we need to find the monthly fixed payment. For that, we can employ the following balloon payment formulas:
Where:
When we find the monthly payment, we can compute the balance due after the term of a balloon loan.
Where:
How to use the balloon payment calculator - a balloon payment exampleFinally, let's see how the balloon payment calculator works with an example. Let's say that Jack found a house with a very competitive price of 100,000 dollars. Since he is planning to move to another city in 5 years, he decides to take a balloon mortgage with 30 years term which has 7 per cent interest rate. How much money should Jack sell his house for after five years to be able to make the last balloon payment mortgage? After filling our balloon payment calculator with the information in this example, we will receive all the necessary details immediately.
Jack will have to pay $665.30 over five years and then pay $94,131.59. Which means Jack needs to sell the house above this amount. DisclaimerYou should consider the balloon payment calculator as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best effort, not exhaustive. For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive useful feedback and advice. Results Your fixed monthly payment is $1,550.60 in the first 5 years, and then your last balloon payment will be $172,513.25. Thus, your total repayment amount is $265,549.12, from which the total monthly payment is $93,035.87, including a total interest payment of $65,549.12. 3D printer - buy vs outsource403b50/30/20 rule… 57 more How do you amortize a balloon loan?A balloon loan is a type of loan that does not fully amortize over its term. Since it is not fully amortized, a balloon payment is required at the end of the term to repay the remaining principal balance of the loan.
What is the formula for balloon payment?We can use the below formula to calculate the future value of the balloon payment to be made at the end of 10 years: FV = PV*(1+r)n–P*[(1+r)n–1/r] The rate of interest per annum is 7.5%, and monthly it shall be 7.5%/12, which is 0.50%.
What is an amortization schedule with balloon payment?This large amount is called a balloon payment, which pays down the remaining balance when the term ends. A balloon mortgage has a short term that does not fully amortize, but the payment is usually based on a 30-year amortization schedule. Balloon mortgages are usually associated with commercial real estate loans.
What is a 5 year balloon with a 30 year amortization?The term of a balloon mortgage is usually short (e.g., 5 years), but the payment amount is amortized over a longer term (e.g., 30 years). An advantage of these loans is that they often have a lower interest rate, but the final balloon payment is substantial.
What is a balloon payment on a commercial loan?A balloon payment is a large payment due at the end of a balloon loan. This type of loan intentionally structures earlier payments during the loan term to be smaller and for later payments—often just the last payment—to be higher. This type of loan can a mortgage, commercial loan, or any other type of amortized loan.
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Commercial loan amortization calculator with balloon payment
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