Calculators

Balloon Payment Calculator

Commercial loans that amortize over 25 years but mature in 10: see the payment and the balance still owed at maturity.

How it works

The monthly payment is sized as if the loan ran the full amortization, often 25 or 30 years, so it stays affordable. The loan matures much sooner, and whatever principal has not been paid by then is due at once. The calculator builds the month-by-month schedule and reads off the balance at maturity. Any interest-only months come first and repay no principal.

balloon = balance remaining after (term − IO months) payments on the amortization schedule
Amortization
The schedule the payment is sized on, e.g. 25 years
Term
When the loan matures and the balloon is due, e.g. 10 years
IO months
Interest-only months at the start
Payment
P · r · (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), with n the amortization in months

Worked example

A $1,000,000 loan at 6.5%, 25-year amortization, 10-year term, no interest-only period.

  1. 1Monthly payment over 300 months: $6,752.07
  2. 2Payments made before maturity: 120
  3. 3Principal repaid over those 120 months: about $224,900
  4. 4Interest paid over the same period: about $585,400

About $775,100, or 77.5% of the original loan, is due as a balloon at year 10.

Frequently asked questions

Why do commercial loans have balloon payments?

Banks and CMBS lenders do not want to lock in a fixed rate for 25 or 30 years, so they lend for 5, 7 or 10 years. A 25-year amortization keeps the payment low enough for the property's income to cover it. The borrower is expected to refinance or sell before the loan matures.

What happens if I cannot pay the balloon?

The loan is in default at maturity even if every payment was on time. Options are a refinance, a sale, an extension negotiated with the lender, or bringing cash to pay the loan down. The danger is timing: if rates have risen or values have fallen, the property may not qualify for a refinance big enough to repay the old loan.

Does an interest-only period make the balloon bigger?

Yes. During IO months no principal is repaid, so less of the loan has been paid off by maturity. A 10-year loan with 3 years of interest only pays down principal for just 7 years. The IO payment is lower, which helps cash flow early on, but the balloon is bigger.

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