Balloon Payment Calculator
Calculate balloon loan monthly payments and the final lump sum payment.
What this calculator does
This balloon payment calculator models a loan whose monthly payments are sized for a long amortization schedule but whose term ends early, leaving a single large payment due. Enter the loan amount, rate, the actual term, and the amortization term, and it returns the monthly payment, the balloon due at maturity, and the total interest paid.
The structure exists to lower the monthly payment, and it does that effectively — but the money is deferred rather than saved. The balloon figure is the number to focus on, because it is the obligation that has to be met on a specific date by refinancing, selling, or paying cash.
When to use it
Commercial real estate is the natural home for this calculator. Most commercial mortgages run five to ten years on a 25 or 30-year amortization, so working out the maturity balance is a routine part of underwriting any acquisition. Investors use it to check that the projected property value at maturity comfortably supports refinancing the balloon.
It is also the right tool for seller-financed deals, land loans, and equipment notes with a residual. And it is worth running before accepting a balloon structure at all: if the answer to how you will cover the balloon is uncertainty rather than a plan, that is the calculator telling you to take a fully amortizing loan instead.
Understanding the inputs
Loan amount is the principal advanced. Interest rate is the annual nominal rate. The two term fields are what make this calculator different: loan term is how long before the balloon falls due, while amortization term is the longer schedule used to size the monthly payment.
A 30-year amortization with a seven-year term is the classic commercial structure. Widening the gap between the two terms lowers the payment and raises the balloon; narrowing it does the reverse. If you set both terms equal, the balloon disappears and you have an ordinary amortizing loan. The extra payment field reduces the balloon directly.
How is this calculated?
Monthly payment calculated on full 30-year amortization. Balloon payment = remaining balance after partial term period.
A worked example
Take a $250,000 commercial loan at 6.75 percent, with payments based on a 30-year amortization but a seven-year term. The monthly payment is about $1,622, comfortably lower than the roughly $3,750 that full amortization over seven years would require.
Over those seven years you pay in about $136,206 — and the balloon due at month 84 is roughly $226,969. In other words, seven years of payments reduced a $250,000 loan by only around $23,000, because nearly $113,000 of what you paid was interest. That balloon is the entire underwriting question for the deal.
Limitations and assumptions
This assumes a fixed rate, no fees, and monthly amortization with no interest-only period. Many commercial loans include one or two years of interest-only payments at the start, which raises the balloon meaningfully. Origination points, exit fees, defeasance or yield maintenance prepayment penalties, and lender reserve requirements are all excluded.
Most importantly, the calculator cannot price refinance risk, which is the real hazard in a balloon structure. It tells you the size of the obligation, not whether credit will be available on acceptable terms when the date arrives. For a commercial deal, model the maturity balance against a conservative valuation and stress-tested exit rate before committing.
Common Questions
- What is a balloon payment?
- A single large lump sum due at the end of a loan whose monthly payments were calculated on a much longer amortization schedule. You make, say, seven years of payments sized for a 30-year loan, then owe the entire remaining balance at once. The low monthly figure is borrowed from that final payment.
- Where are balloon loans actually used?
- Overwhelmingly in commercial real estate, where five, seven, and ten-year terms on 25 or 30-year amortization schedules are the norm. They also appear in seller-financed residential deals, some land loans, and business equipment financing. Consumer mortgages with balloons are heavily restricted under the qualified mortgage rules.
- How do people pay off a balloon?
- Three ways: refinance the balance into a new loan, sell the asset and settle from the proceeds, or pay cash. Refinancing is the usual plan and the usual risk, because it depends on rates, the asset's value, and your credit all being acceptable on a date years in the future.
- What is refinance risk and why does it matter?
- It is the chance that when the balloon comes due, you cannot get a new loan on workable terms. Rates may have risen, the property may have fallen in value, lending standards may have tightened, or your income may have changed. Commercial borrowers whose balloons matured in 2009 and 2023 learned this the hard way.
- How much lower is the payment with a balloon?
- Substantially, because you are only amortizing part of the principal over the payment period. On a $250,000 loan at 6.75 percent, payments based on 30-year amortization run about $1,622 a month. Amortizing the same loan fully over seven years would demand roughly $3,750 — more than double.
- What happens if I cannot pay the balloon?
- You default, and on a secured loan that means foreclosure or repossession. Some notes include an extension option or a conditional right to refinance, but these carry conditions such as a minimum debt service coverage ratio. Read the note early — the time to plan for a balloon is two years out, not two months.
- Is a balloon loan ever the right choice?
- Yes, when the exit is genuinely known. A developer selling a property in five years, a business with a scheduled liquidity event, or an investor who will refinance once a stabilized property supports permanent debt all have real exits. A balloon taken purely to afford a payment you otherwise cannot is a different proposition.
- Do extra payments reduce the balloon?
- Yes, dollar for dollar plus the interest they save. Because the balloon is simply the remaining balance at the end of the term, any additional principal you pay along the way comes straight off it. On a large balloon, modest monthly overpayments over five to seven years can reduce it appreciably.