How to use the Balloon Loan Calculator
- Enter the loan amount and the interest rate.
- Set the amortisation schedule — the term the payment is calculated from, often 30 years.
- Set the balloon date, which is when the remaining balance becomes due, commonly 5 or 7 years.
- Read the balloon payment, which is the lump sum you must refinance, sell into or pay.
- Check how little principal is repaid before the balloon; that is the structural risk of these loans.
How the calculation works
A balloon loan separates the payment schedule from the maturity. Payments are calculated as if the loan ran the full amortisation period, which keeps them low, but the lender calls the entire remaining balance on the balloon date. Commercial real estate loans use this structure almost universally, and it also appears in owner financing and some short-term residential products.
The consequence is that very little principal gets repaid. On a 30-year amortisation with a 7-year balloon, only about 10% of the original balance is paid down when the lump sum falls due. The borrower is therefore relying on one of three exits: refinancing, selling the asset, or having the cash. All three depend on conditions seven years out, which is exactly what nobody can underwrite.
Refinance risk is the real cost of the lower payment. If rates have risen or the property has fallen in value, the refinance may be smaller than the balloon or unavailable altogether — the mechanism behind a large share of commercial real estate distress in every rate cycle. Before taking a balloon, test whether the payment on a fully amortising loan is genuinely unaffordable, and price what a refinance three points higher would cost.
Payment = P·r / (1 − (1 + r)⁻ᴺ) using the amortisation term N; balloon = remaining balance after n payments = P(1 + r)ⁿ − payment·[((1 + r)ⁿ − 1)/r]Source: Standard amortisation mathematics; CFPB balloon-payment mortgage disclosures, 12 CFR §1026.37(b)(5).
Worked example
A $250,000 loan at 7%, amortised over 30 years with a balloon at 7 years.
- Payment on a 30-year schedule at 7% = $1,663 a month.
- After 84 payments, roughly $139,700 of interest and $9,900 of principal have been paid.
- Remaining balance = about $228,800.
- Total paid over the seven years plus the balloon = about $368,500.
A $228,800 balloon after seven years — 91% of the original loan still outstanding despite $139,700 of payments made.
Frequently asked questions
What happens if I cannot pay the balloon?+
You must refinance, sell, or negotiate an extension. Failing all three means default, which is why the exit plan matters more than the payment.
Why choose a balloon loan at all?+
Lower payments and often a lower rate for the short term. It suits borrowers who genuinely expect to sell or refinance before maturity.
Can a balloon loan be refinanced?+
Usually yes, but at whatever rates and values exist on that date. Neither is knowable when you sign.
Are balloon mortgages still available for homes?+
Rarely for owner-occupied residential loans after post-2008 ability-to-repay rules. They remain standard in commercial and owner-financed deals.
Last reviewed September 1, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.