# Balloon Payment Calculator

*“Financial and Insurance Formulas“*(2006)

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**:

`Pmt = (A * i * (1 + i)ⁿ) / ((1 + i)ⁿ - 1)`

Where:

`Pmt`

- monthly payment;`A`

- Loan amount;`i`

- periodic interest rate; and`n`

- number of periods.

When we find the monthly payment, we can compute the balance due after the term of a balloon loan.

`B = (A * (1 + i)ⁿᵇ) - Pmt / i * ((1 + i)ⁿᵇ - 1)`

Where:

`B`

- Balloon payment; and`nb`

- Number of balloon loan periods

## How to use the balloon payment calculator - a balloon payment example

Finally, 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.

`Loan amount = $100,000`

;`Amortization period = 30 years`

;`Balloon payment after = 5 years`

; and`Interest rate = 7%`

.

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.

## Disclaimer

You 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.

**monthly payment**is

**$1,550.60**in the first

**5 years**, and then your

**last balloon payment**will be

**$172,513.25**.

**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**.