A balloon mortgage lets you buy a home with a monthly payment that looks almost like a loan half its size — because the payment is calculated as if the loan were spread over a long, 30-year schedule, even though you are only expected to keep the loan for a short stretch, often five to seven years. At the end of that short stretch, one large "balloon" payment pays off the remaining balance in full. This calculator shows you both sides of that trade: the comfortable monthly amount you will pay, and the lump sum you must refinance, sell, or otherwise cover when the term ends.
Enter the home price and your down payment, set your rate and how long the balloon term runs, and every figure updates instantly. Because this is a mortgage tool, it starts from what the house costs rather than from a dollar amount you already decided to borrow.
How to Use
- Enter the Home Price — the amount you agree to pay the seller.
- Set your Down Payment as a percentage of that price. The calculator subtracts it from the home price to arrive at the actual loan amount you are financing.
- Type your Interest Rate (APR). If you have not locked a rate yet, test a range around the current market average to stress your budget.
- Set the Balloon Term — the number of years until the large lump-sum payment comes due. Seven years is the classic choice, but five- and ten-year balloons are also common.
- Choose the Amortization Schedule — the longer schedule (usually 30 years) used only to size the small monthly payment. It is always longer than the balloon term.
The result card first shows the Loan Amount after your down payment, then your low Monthly Payment (sized off the longer amortization), the Balloon Balance that will be due at the end, the number of monthly payments you will make, the total dollars you will hand over during the term, and the portion of that total that is interest.
The Balloon Mortgage Math
The monthly payment uses the same standard amortization formula as a regular mortgage, except it is spread over the longer amortization period:
M = P × r(1 + r)ⁿ / ((1 + r)ⁿ − 1)
Where P is the loan amount (home price minus down payment), r is the monthly interest rate (the annual APR divided by 12), and n is the number of months in the amortization schedule — 360 for a 30-year loan.
You only make k payments before the balloon comes due. The balloon balance is the principal still left after those k payments, found with the future-value formula:
B = P × (1 + r)ᵏ − M × ((1 + r)ᵏ − 1) / r
Worked example on a $375,000 home with 20% down at 7.0% for a 7-year balloon over a 30-year amortization: the loan amount is $300,000, the monthly rate is about 0.00583, and n = 360. The monthly payment comes out to roughly $1,996, and after 84 payments the remaining balloon balance is about $273,442. You will have paid roughly $167,656 in total over those seven years, of which about $141,098 was interest and only about $26,558 chipped away at principal.
That last number is the whole point of a balloon mortgage: most of your early payments go to interest, not equity, which is exactly why the balloon is so large.
Why Balloon Mortgages Are Cheaper Every Month
Because the payment is stretched over 30 years while the loan is only held for 7, the monthly P&I is far lower than a 7-year fully-amortizing loan would be. On the same $300,000 at 7%, a loan that actually had to be paid off in 84 months would demand roughly $4,500+ a month. The balloon version charges around $1,996. That freed-up cash flow is attractive to buyers who expect either to move, refinance into a conventional mortgage, or have a large sum come in before the balloon matures.
The catch is concentrated risk. If your plans change — if home prices fall, if refinance rates spike, or if your income drops — that $273,000 balance still has to be paid. Balloon mortgages usually require a plan: sell the house, refinance, or have the cash ready.
Examples
Example 1 — The classic 7/23 buyer. A couple offers $375,000, puts 20% down ($75,000), locks 7.0%, and chooses a 7-year balloon over a 30-year amortization. Their loan is $300,000; the monthly payment is about $1,996; and at month 84 a balloon balance near $273,442 comes due. They expect to sell or refinance within seven years, so the low payment fits their short hold.
Example 2 — A jumbo-sized balloon. On a $1,250,000 home with 20% down ($1,000,000 financed) at 6.5% on the same 7/30 structure, the monthly payment is about $6,321, but the balloon balance due at year seven is roughly $904,162. High-value buyers often use this to keep monthly cash flow low while a business or investment position matures.
Example 3 — A shorter 5-year balloon. On a $400,000 home with 20% down at 6.0%, a 5-year balloon over 30 years gives a payment near $1,919 and a balloon of about $297,774 after 60 payments. The shorter term means less interest accrues before the lump sum arrives, but it also gives you less runway to refinance or sell.
FAQ
How is a balloon mortgage payment calculated?
The monthly payment uses the standard amortization formula M = P × r(1+r)ⁿ / ((1+r)ⁿ − 1), where P is the loan amount, r is the monthly rate, and n is the number of months in the long amortization schedule. You then make only k = balloon-term-years × 12 payments, and the remaining balance due at the end is B = P(1+r)ᵏ − M((1+r)ᵏ − 1)/r.
What is a balloon mortgage?
A balloon mortgage is a home loan with a low monthly payment sized off a long amortization (often 30 years), but the full remaining balance is due as one lump sum after a short term (commonly 5, 7, or 10 years). Borrowers typically plan to sell or refinance before that lump sum matures.
How much is the balloon payment?
The balloon payment is the principal left after your scheduled payments. On a $300,000 loan at 7% with a 7-year balloon over a 30-year amortization, it is roughly $273,000 — because most of your early 84 payments covered interest rather than principal.
Are balloon mortgages risky?
They can be. The low payment is appealing, but you must come up with a large lump sum at maturity. If home values drop, refinance rates rise, or your income changes, you may be unable to refinance or sell on time. Balloon loans suit buyers with a credible exit plan, not those who intend to keep the home indefinitely.
Can I pay extra toward a balloon mortgage?
Often, yes — and it directly shrinks the balloon. Extra principal reduces the balance, which lowers the future-value balloon payment. Always check your note for prepayment penalties first, because some balloon loans charge a fee for early paydown.
What happens when the balloon payment is due?
You typically must either sell the home, refinance the balance into a new loan, or pay the lump sum from savings. Lenders do not automatically extend the term, so arrange your exit well before the maturity date.
Disclaimer
This balloon mortgage calculator is provided for informational purposes only and does not constitute financial, lending, or tax advice. Estimates are based on the inputs you enter and the standard amortization and future-value formulas; actual offers vary by lender, credit profile, location, and program. Always confirm your final payment, balloon terms, and refinance plan directly with a licensed mortgage professional before committing to a loan.