This calculator computes the payment amount necessary for a mortgage with a balloon payment, using monthly interest compounding and monthly payments. The term of a balloon mortgage is usually short (e.g., 5 years), but the payment amount is amortized over a longer term (e.g., 30 years). An advantage of these loans is that they often have a lower interest rate, but the final balloon payment is usually substantial.
Balloon payment mortgages are more common in commercial real estate than in residential real estate. The 7-year Fannie Mae Balloon is an example of a balloon payment mortgage which features monthly payments based on a 30-year amortization. At the end of 7 years you pay the remaining balance or refinance.
Take a look at the payment schedule...
You'll need to check the "Show payment schedule" box and hit "Calculate" to see it. The payment schedule breaks your payment into principle and interest amounts. Notice how the payment is fixed untill the balloon payment is reached. This fixed amount is based on the "Amortized over" value that you provide (e.g., 30 years). The balloon amount is the remaining balance after the regular payments have been made.
Check out the Financial Details...
The results will display your monthly payment amount and your balloon payment amount separately in bold. Then the financial details gives you a summary of the financial information you provided.
Tips for the astute...
If you are looking at balloon payments in the US, keep in mind that the balloon payment must be stated in the contract if Truth-in-Lending provisions apply to the loan.
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