Balloon Loan Calculator
Created by: Emma Collins
Last updated:
Enter your loan amount, rate, amortization period, and balloon date to see your regular monthly payment, the exact balloon payment due at maturity, and how both compare to a fully amortizing loan.
Balloon Loan Calculator
FinanceCalculate your regular monthly payment, the balloon payment due at maturity, and total paid — then compare against a fully amortizing loan.
Full amortization period (determines payment size)
When the balloon payment is due
What Is a Balloon Loan?
A balloon loan offers lower monthly payments than a fully amortizing loan by deferring a large portion of the principal to a lump-sum payment at a fixed maturity date.
The monthly payment is calculated based on a long amortization schedule — often 20 to 30 years — but the loan actually matures in a much shorter period, commonly 5, 7, or 10 years.
At maturity, the entire remaining balance is due at once.
The appeal is the lower monthly payment: because payments are calculated over a longer assumed term, the required monthly amount is smaller than a fully amortizing loan with the same maturity date would require.
The trade-off is the balloon — a large, unavoidable payment at the end that the borrower must plan for well in advance.
How the Balloon Payment Is Calculated
The calculator uses the standard amortization formula to compute the monthly payment based on the full amortization period you specify.
It then runs a month-by-month amortization from the loan origination date to the balloon month, recording the remaining balance at each step.
The balance on the balloon date is the balloon payment due.
The abbreviated amortization schedule shows the first few months, the last few months before the balloon, and the balloon month itself — so you can see how much of each early payment goes to interest versus principal, and how much balance remains when the balloon comes due.
Balloon Loan Formulas
Monthly payment = P × r(1+r)^n / ((1+r)^n − 1)
where P = loan amount, r = monthly rate (annual ÷ 12), n = full amortization months
Balance at month k = P(1+r)^k − Payment × ((1+r)^k − 1) / r
Balloon payment = Balance at balloon month k
Total paid to balloon = (Payment × balloon months) + Balloon payment
Example Scenarios
7/23 Balloon Loan — $200,000 at 6.5%
Loan: $200,000. Rate: 6.5%. Amortization: 30 years. Balloon: 7 years (84 months). Monthly payment: $1,264 (same as a 30-year fully amortizing loan). Balloon payment due at month 84: $173,289 — 86.6% of the original balance. Total paid in 7 years before balloon: $106,376 (payments) + $173,289 (balloon) = $279,665.
Commercial 5/20 Balloon — $500,000 at 7.25%
Loan: $500,000. Rate: 7.25%. Amortization: 25 years. Balloon: 5 years (60 months). Monthly payment: $3,588. Balloon payment at month 60: $452,000. Total paid before balloon: $215,280 (payments) + $452,000 (balloon) = $667,280. In these 5 years only $48,000 of principal has been paid down — the rest of each payment went to interest. Plan your refinancing 12–18 months before the balloon date.
How People Use This Calculator
- Commercial real estate investors evaluating balloon loan financing for office, retail, or multifamily properties with defined hold periods.
- Small business owners considering equipment financing with a balloon structure to keep monthly cash flow manageable during a project period.
- Residential buyers evaluating balloon mortgage products available in some markets and comparing them to 15-year or 30-year fully amortizing alternatives.
- Borrowers planning to sell a property before the balloon date who want to verify the loan balance remaining and total paid at sale.
- Lenders and brokers who need to quickly calculate balloon loan terms for proposals and fact sheets.
Managing Balloon Loan Risk
The single most important rule with balloon loans: know your exit strategy before you sign.
Refinancing is the most common exit, but it depends on interest rates, your credit, and property value at the balloon date — none of which are guaranteed.
Build a conservative scenario (rates 2–3% higher than today, property value flat) and make sure you can still exit the loan in that scenario.
Start the refinancing process 6 to 12 months before the balloon date.
Lenders require time for appraisals, underwriting, and closing.
If your property is commercial, institutional lenders may require 90+ days of due diligence.
Do not wait until the final quarter before the balloon date to begin — refinancing under time pressure limits your options and negotiating leverage.
Frequently Asked Questions
What is a balloon loan?
A balloon loan requires regular monthly payments based on a long amortization schedule, but the entire remaining balance comes due at a specified date — the balloon date — before the amortization period ends. This creates a large lump-sum payment at maturity.
Why are balloon loan monthly payments lower than fully amortizing loans?
Because the monthly payment is calculated as if you are paying over the full amortization period (e.g., 30 years), even though the balloon is due in 7 years. Lower payments reflect a longer assumed term, but the remaining balance still has to be paid on the balloon date.
What happens if I cannot make the balloon payment?
Options include refinancing before the due date, selling the property or asset, or negotiating a loan extension with the lender. Not being able to make the balloon payment can result in default — this is why balloon loans require a clear exit strategy established before signing.
Who uses balloon loans?
Balloon loans are used in commercial real estate (5/25 or 7/25 structures), certain auto dealer financing, business loans, and some residential mortgages. They offer lower payments during the term and suit borrowers who expect to sell or refinance before the balloon date.
How is the balloon payment calculated?
The balloon payment equals the outstanding balance on the balloon date. It is calculated by amortizing the original loan over the full amortization period and recording the remaining balance at the balloon month.
Is a balloon loan risky?
Yes — the primary risk is refinancing risk. If interest rates have risen by the balloon date, the refinanced loan may carry a much higher rate. If property values have fallen, you may not be able to refinance at all. Always secure a clear exit plan before taking a balloon loan.
Sources and References
- Fabozzi, F.J. "Fixed Income Mathematics." McGraw-Hill, 4th Edition, 2006.
- Federal Reserve Bank of San Francisco. "Balloon Mortgages." FRBSF Economic Letter, 2005.
- Consumer Financial Protection Bureau. "What is a Balloon Payment?" consumerfinance.gov, 2023.