Balloon Payment Calculator Formula

Understand the math behind the balloon payment calculator. Each variable explained with a worked example.

Use the Balloon Payment Calculator

Formulas Used

Balloon Payment Due

balloon_payment = balloon_balance

Monthly Payment

payment = monthly_payment

Total Paid Before Balloon

total_paid_before_balloon = monthly_payment * n_balloon

Principal Paid Before Balloon

principal_paid = loan_amount - balloon_balance

Interest Paid Before Balloon

interest_paid = monthly_payment * n_balloon - (loan_amount - balloon_balance)

Variables

VariableDescriptionDefault
loan_amountLoan Amount(USD)250000
interest_rateInterest Rate(%)7
amortization_yearsAmortization Period(years)30
balloon_yearsBalloon Due In(years)7
rDerived value= interest_rate / 100 / 12calculated
n_amortDerived value= amortization_years * 12calculated
n_balloonDerived value= balloon_years * 12calculated
monthly_paymentDerived value= r > 0 ? loan_amount * r * pow(1 + r, n_amort) / (pow(1 + r, n_amort) - 1) : loan_amount / n_amortcalculated
balloon_balanceDerived value= r > 0 ? loan_amount * (pow(1 + r, n_amort) - pow(1 + r, n_balloon)) / (pow(1 + r, n_amort) - 1) : loan_amount * (n_amort - n_balloon) / n_amortcalculated

How It Works

Balloon Mortgages

A balloon mortgage has lower monthly payments based on a long amortization schedule, but the remaining balance comes due in a lump sum (the balloon payment) after a shorter term.

How It Works

1. Payments are calculated as if the loan runs the full amortization period (e.g., 30 years) 2. After the balloon term (e.g., 7 years), the entire remaining balance is due 3. Most borrowers refinance or sell before the balloon date

Balloon Balance Formula

Balance = P x [(1+r)^N - (1+r)^n] / [(1+r)^N - 1]

Where P is the original loan, N is the amortization months, and n is the months paid.

Common Uses

  • Commercial real estate financing
  • Bridge loans while waiting for permanent financing
  • Borrowers planning to sell within the balloon period

    • Worked Example

    A $250,000 loan at 7%, amortized over 30 years, with a 7-year balloon.

    loan_amount = 250000interest_rate = 7amortization_years = 30balloon_years = 7
    1. 01Monthly payment (30-year amortization): $1,663.26
    2. 02Payments made: 84 months x $1,663.26 = $139,714
    3. 03Balloon balance after 7 years: $228,951
    4. 04Principal paid: $250,000 - $228,951 = $21,049
    5. 05Interest paid: $139,714 - $21,049 = $118,665
    6. 06The $228,951 balloon must be paid, refinanced, or the property sold

    Ready to run the numbers?

    Open Balloon Payment Calculator