How to use this calculator
- Enter the loan or note amount.
- Enter the interest rate.
- Enter the amortization period used to calculate payments (ignored for interest-only).
- Enter when the balloon is due.
- Choose amortized or interest-only payments and review the balloon amount.
Worked example
A $200,000.00 note at 7% amortized over 30 years with a 5-year balloon has payments of $1,330.60. After 60 payments the borrower still owes $188,263.18. Only 5.87% of the principal was repaid, because early payments are mostly interest. Switch to interest-only and the payment drops to the monthly interest, but the balloon is the full $200,000.00.
These are the default inputs above, so you can follow along.
The formula
Amortized: M = P × r / (1 − (1 + r)−n), and the balloon after k payments is B = P(1 + r)k − M[(1 + r)k − 1] / r. Interest-only: M = P × r and the balloon equals the full principal P. If the balloon falls exactly at the end of the amortization period, the balloon is $0.
Frequently asked questions
Why is my balloon so large?
In the early years of a long amortization most of each payment is interest, so the balance falls slowly. A 5-year balloon on a 30-year schedule typically still leaves most of the loan unpaid.
How do people pay a balloon?
Most refinance with a bank, sell the property, or negotiate an extension. Plan for this well before the due date.
Is an interest-only balloon riskier?
Yes, for the borrower. The balance never goes down, so the entire principal is due at the balloon.
Can a balloon be extended?
Only if the seller or lender agrees. Some notes include an extension option for a fee or at a higher rate.
Are balloon payments allowed on home loans?
Rules vary, especially for owner-occupied homes. In the U.S., federal and state lending rules can restrict balloons for consumer home loans, and some seller-financing exemptions limit them. Get legal advice for your situation.