How To Calculate a Balloon Amount

Calculate the balloon payment for a mortgage or loan due after a series of regular payments. When the periodic payment is not sufficient to fully amortize the loan over the given term, the final payment will be larger than the regular payments. This final payment is called a balloon payment. This tutorial demonstrates how to set up the calculator to solve this type of financial problem.

Note: The questions “What is the balloon payment at period 48?” and “What is the remaining balance at period 48?” have different meanings, and a financial calculator should return different results. The first question asks for the payment due at period 48, including any accrued interest. The second asks for the balance remaining after the payment has been made, with no additional interest due. Many online financial calculators confuse these two concepts.

All users should first complete the more detailed initial tutorial to understand the Ultimate Financial Calculator’s (UFC) basic concepts and settings.

To create a loan schedule when the balloon payment amount is unknown, follow these steps:

1. Set Schedule Type to Loan.
   • Alternatively, click New to clear any existing entries.
2. Click Settings, then select Rounding Options. Set “Rounding” to Open balance — no adjustment.
3. In the header section, apply the following settings:
   1. Select Normal for Calculation Method.
   2. Set Initial Compounding to Monthly.
   3. Enter 6.75 for Initial Interest Rate.

4. In row 1 of the cash‑flow input area, create a “Loan” series.
   1. Set the “Date” to July 1, 2020.
   2. Set the “Amount” to 365,000.00.
   3. Set “# Periods” to 1.
      • Note: Because the number of periods is 1, you will not be able to set a frequency. If a frequency is entered, it will be cleared when you exit the row.

5. Move to the second row of the cash‑flow input area. Select “Payment” for the “Series” type. In this example, you will create a schedule for a mortgage with a balloon payment due after 5 years (at the 60th monthly payment). The monthly payment will be calculated as if the loan were amortized over 30 years (360 monthly payments).
   1. Set the “Date” to August 1, 2020.
   2. Set the “Amount” to “Unknown” by typing U.
   3. Set “# Periods” to 360. This calculates the payment amount as if the loan were a 30-year mortgage.

6. Click Calculate. The result is $2,367.38.

7. Calculate the final balloon payment amount.
   1. Change “# Periods” in the second row from 360 to 60.
   2. Move to the third row of the cash‑flow input area. Select “Payment” for “Series”.
   3. If not already set, enter the date as August 1, 2025 (end of the 5th year).
   4. Set the “Amount” to “Unknown” by typing U.
   5. Set “# Periods” to 1.

8. Click Calculate. The balloon payment due will be $344,573.94.

9. To view a detailed amortization schedule showing the monthly allocation to principal and interest and the final balloon payment amount, click Schedule on the button bar.

10. To view a chart of the balloon‑payment loan, click Charts.

Variation: Instead of having the calculator compute the payment amount, you can enter your own. In the first calculation step, enter your desired payment amount instead of “Unknown”. Set the number of payments to 60. Then skip ahead to step 7 to calculate the balloon payment.

The Ultimate Financial Calculator can easily calculate a loan’s balloon payment when one is required. It supports complex cash‑flow structures with variable payments and interest rates. Be cautious when comparing results with other financial calculators. Many incorrectly treat the remaining balance as the balloon payment—this is inaccurate.

Back to the Ultimate Financial Calculator.