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Balloon Payment Calculator
Use this free balloon payment calculator to see the full picture of a balloon loan before you sign one. Enter the loan amount, rate, amortization term, and balloon term, and it works out the monthly payment, the lump sum due on the balloon date, how much you will have paid by then, and how much of that was interest. The balance chart shows how slowly the loan shrinks while the balloon date approaches.
The long term the payment is based on.
When the remaining balance comes due.
Deducted from the loan amount first.
How it works
A balloon loan has two terms, and confusing them is the mistake that catches borrowers out. The amortization term is the long schedule the monthly payment is calculated from — often 30 years. The balloon term is the much shorter period after which the whole remaining balance comes due in one lump sum — often 5 or 7 years. For the first few years the loan feels like an ordinary low-payment mortgage, because the payments are exactly the same as on a 30-year loan. Then the balloon date arrives, and almost the entire original loan is still owed.
The calculator first finds the monthly payment with the standard amortization formula, using the amortization term. On a $200,000 loan at 6 percent amortized over 30 years, that payment is $1,199.10 a month — the same as a normal 30-year mortgage. Then it applies that payment for the balloon term only: 60 monthly payments over 5 years. The balance after those 60 payments is the balloon payment, $186,108.71. Only $13,891.29 of principal has been repaid in five years, because early mortgage payments are mostly interest.
That slow start is the key fact about balloon loans. In the first year of the example loan, about $11,933 of the $14,389 paid is interest and only about $2,456 reduces the balance. By year five the split has barely improved. The total paid by the balloon date is $71,946.06, of which $58,054.78 is interest and $13,891.29 is principal. Add the balloon payment to the total paid and the borrower will have handed over $258,054.77 for a $200,000 loan over five years — unless they refinance the balloon amount and keep paying interest on it for years more.
Balloon loans make sense in a few specific situations. A business buying a property it plans to sell within a few years may prefer low payments now and a payoff from the sale. A borrower expecting a lump sum — an inheritance, a bonus, a maturing investment — can use the balloon structure to match the loan to that income. Seller financing often uses a balloon because the seller wants their money back within a few years rather than over three decades. In each case the plan for the final payment exists before the loan is signed, not after.
The danger is a plan that depends on refinancing. If rates rise, if the borrower's income falls, if the property loses value, or if lending tightens, the refinance may be unavailable or unaffordable — and the balloon is still due. That is why the extra-payment field matters: every extra dollar paid monthly goes straight to principal and cuts the balloon by the same amount, plus the interest that principal would have accrued. An extra $200 a month on the example loan cuts the 5-year balloon by more than $13,000. The down-payment field works the same way from the other end: borrowing less from the start means a smaller payment and a smaller balloon.
Worked example
A $200,000 loan at 6 percent annual interest, amortized over 30 years, with the balloon due after 5 years and no extra payments.
Step 1: Monthly rate — 6% ÷ 12 = 0.5% per month; 360 monthly payments in 30 years.
Step 2: Monthly payment — $200,000 × 0.005 ÷ (1 − 1.005−360) = $1,199.10.
Step 3: Balance after 60 payments — $200,000 × 1.00560 − $1,199.10 × (1.00560 − 1) ÷ 0.005 = $186,108.71. That is the balloon payment.
Step 4: Total paid in 5 years — $1,199.10 × 60 = $71,946.06.
Step 5: Principal repaid — $200,000 − $186,108.71 = $13,891.29.
Step 6: Interest paid — $71,946.06 − $13,891.29 = $58,054.78.
Enter the same numbers in the calculator and it gives exactly the same result: a monthly payment of $1,199.10, a balloon payment of $186,108.71, and $58,054.78 of interest paid by the balloon date. Now add $200 a month of extra payment and watch the balloon balance fall by more than $13,000.
FAQ
What is a balloon payment?
A balloon payment is a large lump sum that comes due at the end of a loan's balloon term. The monthly payments are calculated as if the loan ran for a much longer amortization term — for example, 30 years — so they stay low, but after a shorter period, such as 5 years, the remaining balance is due in full. On a $200,000 loan at 6 percent with a 30-year amortization and a 5-year balloon, the monthly payment is $1,199.10 and the balloon payment is $186,108.71.
Why would anyone choose a balloon loan?
Balloon loans keep monthly payments low, which helps when cash flow is tight or when the borrower expects to sell, refinance, or receive a lump sum before the balloon date. They are common in commercial property, land deals, and seller financing, and sometimes in car loans. The trade-off is the risk at the end: you must have the balloon amount ready, or be able to refinance, when it comes due.
What happens if I cannot pay the balloon amount?
If you cannot pay the balloon amount when it comes due, the usual options are to refinance the remaining balance into a new loan, sell the property or asset and use the proceeds, or negotiate an extension with the lender. None of these is guaranteed: refinancing depends on your credit, income, and the property's value at the time, and selling depends on the market. Never take a balloon loan without a realistic plan for the final payment.
How is the balloon balance calculated?
First work out the monthly payment by amortizing the loan over the full amortization term, just like a normal loan. Then apply that payment for the balloon term and find the balance that is left. The balance falls slowly at first because most of the early payments cover interest: after 5 years of a 30-year amortization, only about $13,891 of a $200,000 loan at 6 percent has been repaid.
Can I make extra payments on a balloon loan?
Usually yes, and extra payments are the best way to shrink the balloon amount, because every extra dollar goes to principal and reduces the final lump sum by the same amount plus the interest it would have earned. This calculator has an extra-payment field so you can see the effect: an extra $200 a month on the example loan cuts the 5-year balloon balance by more than $13,000. Check your loan for a prepayment penalty first.