Balloon Loan Calculator

A balloon loan has small payments based on a long amortization, then one large lump sum due early. See both here.

How the Balloon Loan Calculator works

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Example calculation

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Tips for using the Balloon Loan Calculator

• Match the amortization length to your exit plan, not to the smallest payment - a 30-year amortization on a 5-year balloon means about 93% of the loan is still owed at the deadline, so only choose it if you are confident you can refinance or sell.
• Calculate the balloon before you sign, not after - many borrowers fixate on the low monthly payment and never check that a six-figure lump sum comes due, which is the single most common balloon-loan shock.
• Stress-test the refinance: re-run the numbers assuming rates are 2-3 points higher at the balloon date, because if you cannot qualify or afford the new payment, the balloon can force a distressed sale (a $182,295 balloon refinanced over 23 years jumps from $1,330.61/mo at 7% to $1,566.40/mo at 9%).
• Ask whether the loan has a built-in reset or conversion clause - some balloon notes re-amortize at the prevailing rate instead of demanding cash, which removes most of the refinancing risk.
• Compare the balloon against your projected equity if it is real estate - if the property is likely to be worth more than the balloon, selling at the term end is a clean exit even without refinancing.
• Watch for prepayment penalties - paying the loan down faster shrinks the balloon, but some commercial balloon notes penalize early principal, so confirm extra payments are allowed before relying on them.
• For seller-financed home deals, line up your refinance lender 6-12 months ahead of the balloon date; conventional lenders treat seller notes differently and approval can take longer than you expect.
• Do not confuse a balloon with interest-only - a balloon loan retires some principal each month (in Example 1, $371 more than a pure interest payment), so your balloon is smaller than the original loan, unlike a true interest-only balance.
• Set aside a sinking fund for the balloon if you intend to pay it off - treating the lump sum like a savings goal removes the pressure to refinance at a bad time; model it with a savings-goal calculator.
• Read the default terms: missing the balloon payment is a default that can trigger foreclosure or repossession on the entire balance, so the balloon date deserves the same planning as the loan itself.

Balloon loan vs. fully amortizing loan vs. interest-only

A balloon loan sits between a normal loan and an interest-only loan: it pays down some principal but not all of it, leaving a lump sum due early. A fully amortizing loan reaches a $0 balance on schedule with no surprise; an interest-only loan pays zero principal during its interest phase; a balloon loan pays a little principal, then demands the rest at once.

Feature	Fully amortizing	Balloon	Interest-only
Principal paid during term	All of it	A small slice (about 7-9% on 30/5-7)	None (during IO phase)
Payment size	Highest	Low	Lowest
Lump sum at term end	$0	Large balloon	Full balance still owed
Equity built from payments	Steady	Minimal	Zero
Refinance pressure	None	High	High

On $200,000 at 7%, a fully amortizing 7-year loan costs $3,018.54 and ends at $0; the 30-year-amortized balloon costs $1,330.60 and still owes $182,294.83 at year 7; a pure interest-only payment is $1,166.67 and leaves the full $200,000. The balloon's defining trait is that middle ground - real principal paydown, but far too little to clear the debt by the deadline.

How to calculate a balloon payment by hand or in Excel

In a spreadsheet you need two formulas: PMT to size the regular payment on the long amortization, and FV to find the balloon balance after the short term.

Step 1 - the regular payment (30-year amortization, 7.5%, $500,000):

=PMT(0.075/12, 30*12, -500000) returns $3,496.07.

Step 2 - the balloon balance after 7 years (84 payments). Use the future-value function on the same loan, keeping the payment positive and the principal negative:

=FV(0.075/12, 7*12, 3496.07, -500000) returns about $459,170.

FV works because the remaining balance is just the original principal grown by interest minus the payments already made. If you prefer one cell, nest it: =FV(0.075/12, 7*12, PMT(0.075/12, 30*12, -500000), -500000). By hand, amortize month by month: interest = balance × (rate ÷ 12), principal = payment − interest, new balance = balance − principal, repeated 84 times. Our calculator does exactly this loop, so rounding matches a real lender's schedule down to the cent (the balloon is $459,170.19, not just "about $459,170").

The refinance, sell, or pay decision at the balloon date

Every balloon loan ends with one of three moves - refinance the balance into a new loan, sell the asset to cover it, or pay the lump sum in cash - and choosing wrong can be expensive.

• Refinance is the default plan for commercial real estate and seller-financed homes. The risk is concrete: if a $182,295 balloon must be refinanced over 23 remaining years, a jump from 7% to 9% pushes the new payment from $1,330.61 to $1,566.40 a month - and a weaker credit profile or a low appraisal can mean you do not qualify at all. Always model the new loan with a refinance break-even tool.
• Sell works when the asset is worth more than the balloon. Compare your likely sale price to the balloon figure this tool produces; if there is a comfortable cushion, selling is a clean exit even if rates rose.
• Pay in cash suits borrowers who treated the balloon as a savings target. A balloon you can self-fund carries almost no refinancing risk.

The danger is having no plan. Because a 30-year-amortized balloon leaves 90%+ of the balance owed at year 5-7, a balloon you cannot refinance, sell into, or pay can force a distressed sale or default - so decide your exit before you borrow.

Common mistakes with balloon loans

The biggest mistake is shopping on the monthly payment alone and ignoring the lump sum waiting at the end.

• Assuming you can always refinance. Refinancing depends on rates, credit, income, and the asset's value - none of which are guaranteed at the balloon date. Treat refinancing as a hope, not a plan.
• Confusing the term with the amortization. A 7-year balloon on a 30-year amortization is not a 7-year loan - on $200,000 at 7% you still owe $182,294.83 (91%) at year 7.
• Forgetting the interest math. Early payments are mostly interest, so even after years of paying you have retired very little principal (just 8.2% in our 30/7 example, and only about 5.9% on a 30/5 schedule).
• Mistaking it for interest-only. A balloon does pay some principal; an interest-only loan pays none, so the balloon balance is always a bit smaller than the original loan. They are different products with different end balances.
• Skipping a sinking fund. If you plan to pay the balloon, not saving for it monthly leaves you scrambling - a savings-goal calculator turns the balloon into a fundable target.

Is a balloon loan a good idea? Benchmarks to judge by

A balloon loan is reasonable when you have a concrete, near-certain exit before the balloon date; it is dangerous when your only plan is to hope you can refinance. Use these reference points to judge a deal:

• Term length: 5 and 7 years are the most common balloon terms in US commercial real estate; 3-year balloons appear in equipment and some auto deals.
• Balloon size: on a 30-year amortization, expect roughly 91-93% of the original loan to still be due at a 5-7 year balloon (e.g. $186,108.71 at 5 years and $179,278.77 at 7 years on a $200,000 loan at 6%). If the quoted balloon is far smaller, the amortization is shorter than you think.
• Equity cushion: if you plan to sell, the asset's projected value should exceed the balloon by a meaningful margin (commercial lenders often want loan-to-value at or below 75% at refinance).
• Payment savings: the balloon's regular payment should be dramatically lower than a fully amortizing loan of the same short term - in Example 1 it was less than half ($3,496.07 vs $7,669.14) - or the balloon risk is not worth taking.

If your exit is solid and the payment savings are large, a balloon can be a smart cash-flow tool. If not, a standard amortizing loan is safer.

Where balloon loans show up - common uses

Balloon loans are most common where the borrower expects to refinance or sell within a few years, so the low payment matters more than a full payoff.

• Commercial real estate: the classic case. An investor finances a property on a 20-30 year amortization but a 5-7 year balloon, planning to refinance once the property's income and value rise, or to sell before the balloon. A $300,000 deal at 8% on a 25-year amortization with a 7-year balloon runs $2,315.45 a month and leaves $264,634.01 due.
• Seller financing: when a home seller acts as the bank, a balloon lets the buyer make affordable payments for a few years and then refinance into a conventional mortgage once they qualify - a $250,000 seller note at 6% on a 30-year amortization due in 5 years runs $1,498.88/mo with a $232,635.89 balloon.
• Auto and equipment deals: some loans (including certain lease-style auto contracts) use a balloon - a low payment with a large final amount that the borrower pays, refinances, or covers by returning the asset. The depreciation risk is real: if a $35,000 car is worth less than its ~$16,506 year-4 balloon, you owe the gap.
• Land and bridge financing: short-term loans where the borrower intends to build, sell, or replace the financing before the balloon.

For a business purchase, also compare against a standard business loan that fully amortizes, since the balloon's deadline is an added risk a normal term loan does not carry.

Reset and conversion options that reduce the risk

Some balloon loans soften the deadline with a reset or conversion feature, so read the note carefully before assuming you must produce cash.

• Reset (two-step) option: at the balloon date the lender re-amortizes the remaining balance at the then-current rate, giving you a new fully amortizing payment instead of demanding the lump sum. On a $180,000 loan at 7%, years 1-7 cost $1,197.54 and leave $164,065.35; reset over the remaining 23 years at 7.5% makes the new payment about $1,249.18. You usually must meet conditions - on-time payment history, same owner, the loan still secured by the same property.
• Conversion option: the balloon loan converts to a standard fixed loan at a preset margin over an index, removing the need to qualify for a brand-new mortgage.
• Extension clause: the lender may grant a short extension for a fee, buying time to arrange permanent financing.

These features turn the scariest part of a balloon - the all-or-nothing deadline - into something closer to an adjustable-rate loan. If your note has none of them, your refinance/sell/pay plan has to be airtight. Either way, model the post-balloon payment now with a loan calculator so the reset rate does not surprise you.

Balloon payment quick reference: $200,000 loan, 30-year amortization

The table below shows the monthly payment and the lump-sum balloon owed on a $200,000 loan amortized over 30 years, across common rates and the two most common balloon terms (5 and 7 years). The monthly payment depends only on the rate and the 30-year amortization, so it is the same for the 5-year and 7-year versions; only the balloon balance differs because a 7-year term gives two more years of principal paydown. Every figure is recomputed. Notice how little principal disappears: even after 7 years at 7%, you still owe about $182,295 of the original $200,000.

Rate	Monthly payment	Balloon owed at 5 years	Balloon owed at 7 years
6.0%	$1,199.10	$186,108.71	$179,278.77
7.0%	$1,330.60	$188,263.18	$182,294.83
8.0%	$1,467.53	$190,139.71	$184,954.86

For comparison, fully amortizing that same $200,000 at 7% over a true 7-year loan would cost $3,018.54 a month but leave $0 owed. The balloon saves $1,687.94 a month, but you must refinance, sell, or pay the lump sum at the balloon date. Recompute your own loan in the Balloon Loan Calculator.

Related on this site

Interest-Only Mortgage Calculator · Mortgage Refinance Calculator · Loan Calculator · Business Loan Calculator · Savings Goal Calculator · Auto Loan Calculator

For a related deep dive, see CFPB on balloon-payment loans.

Balloon Loan Calculator — frequently asked questions

What if I cannot pay the balloon?

You typically must refinance or sell the asset. Plan for this well before the balloon date.

Why use one?

Lower payments short-term, common in commercial real estate and some auto deals.

What if I can't pay the balloon?

You typically must refinance or sell the asset; default risk is high without a plan.

Why use a balloon loan?

Lower short-term payments when you expect to sell or refinance before the balloon is due.

How much would the payment and balloon be on a $200,000 balloon loan at 7% amortized over 30 years, due in 7 years?

The monthly payment is about $1,330.60 and the balloon due at year 7 is roughly $182,294.83. Because the payment is sized to a 30-year schedule but the loan is due in 7 years, you only pay down about $17,705 of principal over those 7 years while paying about $94,066 in interest. Run your own figures in the <a href="/balloon-loan-calculator/">Balloon Loan Calculator</a> to confirm the lump sum you'll owe.

What is the balloon payment on a $150,000 loan at 6.5% with a 30-year amortization and a 5-year term?

The balloon is about $140,416.47 after 5 years, with a monthly payment near $948.10. Out of $150,000 borrowed you repay only about $9,584 of principal over 5 years while paying roughly $47,303 in interest. That tiny principal dent is why a refinance-sell-or-pay plan matters before the balloon date arrives.

How is a balloon loan different from an interest-only loan?

A balloon loan still pays down some principal each month, while an interest-only loan pays none until the term ends. On $200,000 at 7%, an interest-only payment is $1,166.67 and the balance stays at $200,000; a balloon (30-year amortization) costs $1,330.60 and trims the balance to about $182,295 after 7 years. The balloon costs more monthly but leaves a slightly smaller lump sum. Compare with the <a href="/interest-only-mortgage-calculator/">Interest-Only Mortgage Calculator</a>.

How is a balloon loan different from a standard fully amortizing loan?

A standard loan pays off completely by term end, while a balloon leaves a large balance due. A $200,000 loan at 7% fully amortized over 7 years costs $3,018.54 a month and ends at $0. The same loan as a 30-year-amortized balloon costs only $1,330.60 a month but owes about $182,295 at year 7. You trade a $1,687.94 lower payment for a giant lump sum. See the <a href="/loan-calculator/">Loan Calculator</a> for the fully amortizing version.

How do I calculate a balloon payment in Excel?

Use two built-in functions: PMT for the payment and FV for the balloon. For a $100,000 loan at 7% over a 30-year amortization due in 5 years, enter =PMT(0.07/12,360,-100000) which returns $665.30, then =FV(0.07/12,60,665.30,-100000) which returns about $94,131.59 (the balloon owed). Keep the payment positive and the principal negative so the balloon comes out as a positive amount. The PMT uses 360 months (the amortization) and FV uses 60 months (the actual term). Verify the same inputs in the <a href="/balloon-loan-calculator/">Balloon Loan Calculator</a>.

How do I figure a balloon payment by hand?

Compute the monthly payment over the long amortization, then find the remaining balance at the short term's end. For $100,000 at 7% (monthly rate 0.00583333) over 360 months, the payment is $665.30. The balloon after 60 payments is L(1+r)⁶⁰ - P((1+r)⁶⁰-1)/r = 100,000(1.417625) - 665.30(71.5929) = about $94,132 by hand; our <a href="/balloon-loan-calculator/">calculator</a> carries the unrounded payment and returns the exact $94,131.59.

What happens to my balloon balance if I have to refinance at a higher rate?

Refinancing a balloon at a higher rate sharply raises your new payment, which is the core refinancing risk. Say a $200,000 loan leaves a $182,294.83 balloon at year 7 and you refinance over the remaining 23 years: at 7% the new payment is about $1,330.61, but if rates rose to 9% it jumps to $1,566.40 a month. If your credit also worsened, you might not qualify at all. The <a href="/mortgage-refinance-calculator/">Refinance Calculator</a> helps you model the reset.

Is a balloon car loan a good idea on a $35,000 vehicle?

A balloon car loan lowers your payment but bets you can sell or refinance before the lump sum hits, which is risky on a depreciating asset. On $35,000 at 5% with a 7-year amortization due in 4 years, the payment is $494.69 and the balloon is about $16,505.57. A standard 4-year loan costs $806.03 but ends at $0. If the car is worth less than $16,505 at year 4, you owe the gap out of pocket. See the <a href="/auto-loan-calculator/">Auto Loan Calculator</a>.

How much principal do I actually pay off before a 5-year balloon on a $250,000 loan at 7%?

Only about $14,671, or roughly 5.9% of the loan, because early payments are mostly interest. The monthly payment is $1,663.26 and the balloon at year 5 is about $235,328.97. That is why people call balloons "front-loaded interest" deals: you've barely touched the principal when the lump sum comes due. Model your own paydown in the <a href="/balloon-loan-calculator/">Balloon Loan Calculator</a>.

What payment and balloon should I expect on a $300,000 commercial property loan at 8% over a 25-year amortization with a 7-year term?

Expect a monthly payment near $2,315.45 and a balloon of about $264,634.01 at year 7. Commercial real estate commonly uses this structure so investors get manageable payments and a planned exit (sale or refinance) at the balloon date. Over 7 years you'd pay roughly $159,132 in interest and only $35,366 in principal. Plug your figures into the <a href="/business-loan-calculator/">Business Loan Calculator</a> or the balloon tool.

Does a balloon loan really lower my monthly payment versus a regular loan?

Yes, the monthly payment is identical to a standard loan amortized over the long schedule, which is much lower than a short-term loan. A $150,000 balloon at 6.5% with a 30-year amortization costs $948.10 a month, the exact same as a true 30-year loan. The catch is you only get 5 or 7 years before the full balance comes due, instead of 30 years to repay it. The <a href="/loan-calculator/">Loan Calculator</a> shows the standard equivalent.

What is a balloon loan reset or two-step option, and how does it change my payment?

A reset (two-step) balloon converts to a new amortizing loan at the balloon date instead of demanding the lump sum, usually at the then-current rate. On a $180,000 loan at 7%, years 1-7 cost $1,197.54 and leave a $164,065.35 balance; if it resets over the remaining 23 years at 7.5%, the new payment becomes about $1,249.18. It removes the lump-sum risk but you'll pay whatever rate the market offers at reset.

Is a 7-year balloon worth it on a $400,000 loan at 7.25%?

It is only worth it if you're confident you'll sell or refinance, because the year-7 balloon is huge: about $365,984.86 on a payment of $2,728.71. Over those 7 years you'd pay roughly $195,196 in interest and chip away only about $34,015 of principal. If you plan to hold the property long-term, a standard mortgage avoids the refinancing gamble. Test both in the <a href="/mortgage-calculator/">Mortgage Calculator</a>.

How much will a $50,000 balloon loan at 9% with a 5-year term cost me before the balloon?

The payment is about $402.31 a month and the balloon at year 5 is roughly $47,940.07. Over 5 years you'd pay around $24,138.68 in total payments, of which only $2,059.93 reduces principal and $22,078.75 is interest. At 9% on a 30-year amortization, almost nothing comes off the balance, so the balloon is nearly the full original loan. Confirm in the <a href="/balloon-loan-calculator/">Balloon Loan Calculator</a>.

Are balloon loans legal and common with seller financing?

Yes, balloons are legal and very common in seller financing, where the owner carries the note and wants their cash back within a few years. A typical $250,000 seller-financed deal at 6% on a 30-year amortization due in 5 years runs $1,498.88 a month with a balloon of about $232,635.89. The buyer plans to refinance into a conventional loan by year 5. State consumer-protection rules can apply, so confirm terms locally rather than assuming any one lender's policy.

Why does my balloon get bigger when the interest rate is higher, even though the payment also rises?

A higher rate slows principal paydown, so more of the original balance remains as the balloon. On a $200,000 loan with a 30-year amortization due in 7 years: at 6% the balloon is about $179,278.77, at 7% it's $182,294.83, and at 8% it's $184,954.86. The payment rises too ($1,199.10, $1,330.60, $1,467.53), but the share going to interest grows faster, leaving more principal owed. See the rate effect in the <a href="/balloon-loan-calculator/">Balloon Loan Calculator</a>.

Guides & articles

• How a Balloon Loan Keeps Your Payments Low (and What the Balloon Really Costs)
• Balloon Loan Refinancing Risk: What If You Can't Refinance?

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