Worked example: 30-year amortization with a 5-year balloon
Assume a $200,000 loan at 7.00%. The regular payment is calculated over 30 years, but the remaining balance is due after 60 monthly payments.
| Loan amount | $200,000.00 |
|---|---|
| Regular monthly payment | $1,330.60 |
| Payments before balloon | 60 |
| Principal repaid in 60 months | $11,736.82 |
| Interest paid in 60 months | $68,099.48 |
| Estimated balloon balance | $188,263.18 |
This example excludes fees and assumes monthly compounding and on-time payments. The final amount due may also include accrued interest, late charges, or other amounts required by the note.
Why the balloon remains so large
The payment is based on a 360-month amortization period, but only 60 payments are made before maturity. Early payments contain a relatively large interest portion, so only $11,736.82 of principal is repaid during the first five years.
Compare the balloon structure with a fully amortizing schedule or a shorter amortization period to see the payment required to reach a zero balance by month 60.
What to verify on a balloon schedule
- Amortization period used to calculate the regular payment.
- Actual maturity or balloon date.
- Payment frequency and exact first payment date.
- Interest rate and day-count method.
- Whether the balloon includes interest accrued after the last regular payment.
- Whether refinancing, renewal, or extension is optional or guaranteed.
Model alternatives before maturity
Change the payment, maturity date, or interest rate and compare the remaining balance. A borrower can see how much a higher regular payment would reduce the balloon, while a lender can document the balance expected at maturity.
For a loan whose rate changes before the balloon date, use the changing-rate amortization guide.
Build and compare the schedule
Use the free amortization calculator for a standard schedule. Use the registered Windows amortization software when you need to edit individual dates, payments, rates, or notes and save the revised loan.