The balloon payment calculator is a loan calculator that includes a balloon payment that aids in estimating the monthly fixed installment and the final balloon payment of a given balloon loan construction. In addition, you can view the monthly or annual balances in the amortization schedule with the provided balloon payment.

Continue reading to find out what a balloon payment is, how to calculate one, and to see an example of one. In order for you to use the tool as a balloon mortgage calculator, we also define balloon mortgage.

## What is a balloon payment definition?

A balloon loan is a type of loan arrangement where only a small portion of the principal balance is repaid over its typical short repayment term.

In other words, the fixed monthly payments are insufficient to pay off the loan balance and interest. As a result, the borrower must make a significant final payment at the end of the loan term known as a balloon payment.

## What is a balloon mortgage?

One type of loan repayment option is a balloon mortgage, which has a brief term and a sizable lump sum payment due at the end of the loan. As previously mentioned, the balloon payment is the final installment that settles the outstanding balance following the final month of the monthly payment. The balloon mortgage doesn’t fully amortize because the monthly fixed payment is calculated using a longer amortization schedule, typically 20 to 30 years.

Balloon mortgages typically relate to businesses that can afford such a loan structure because they expect a significant amount of money after a short period of time. These loans include, for instance, commercial real estate loans that permit purchases of commercial properties for expansion or investments in the renovation of buildings.

## How to calculate balloon payment of a loan?

We must first determine the fixed monthly payment. For that, we can employ the following balloon payment formulas:

Pmt is equal to (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 determine the monthly payment, we can calculate the balloon loan’s remaining balance.

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

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 look at an illustration of how the balloon payment calculator functions.

Let’s say Jack discovered a home for the very reasonable price of $100,000. He decides to obtain a balloon mortgage with a 30-year term and a 7 percent interest rate because he intends to relocate in five years. After five years, how much should Jack ask for his home in order to cover the final balloon payment on his mortgage?

We will receive all the necessary information right away after entering the information in this example into our balloon payment calculator.

`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. Therefore, Jack must raise the price at which the house is sold.

You should use the balloon payment calculator as a guide for making approximations in your finances. Despite our best efforts, all payment figures, balances, and interest figures are estimates based on the information you provided in the specifications and are not all-inclusive.

Due to this, we developed the calculator solely for instructional purposes. However, if you come across any errors or experience any relevant drawbacks, we would appreciate any constructive criticism and recommendations.

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## FAQ

**How do I calculate a balloon payment?**

**Solution:**

- The term structure. …
- The following formula can be used to determine the future value of the balloon payment that will be made after 10 years: FV = PV*(1+r)n-P*[(1+r)n-1/r)].
- The rate of interest per annum is 7. 5%, and monthly it shall be 7. 5%/12, which is 0. 50%.

**How does a 5 year balloon payment work?**

On a balloon mortgage loan, the payment is typically due on the loan maturity date, or the day the mortgage is fully due. Therefore, a balloon payment is required to pay off the remaining loan balance in the case of a five-year balloon mortgage at the end of the five-year term.

**How much is a typical balloon payment?**

A balloon payment typically exceeds the loan’s average monthly payment by two times, and it frequently exceeds $10,000. Most balloon loans have a single, substantial payment due at the end of the loan term to cover the entire balance.

**What is a 20 year balloon payment?**

As previously mentioned, the balloon payment is the final installment that settles the outstanding balance following the final month of the monthly payment. The balloon mortgage doesn’t fully amortize because the monthly fixed payment is calculated using a longer amortization schedule, typically 20 to 30 years.