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Published November 2026 · Calculations run in your browser; no information is sent to Power of Interest by these tools.
LOAN MATHEMATICS
Balloon Payment Formula with Worked Example
Understand the remaining balance due after a shorter balloon term when the monthly payment was amortized over a longer period.
The monthly payment and balloon formula
A balloon loan may use a long amortization period to determine regular payments, while the loan itself matures earlier. For example, payments may be calculated over 30 years even though the outstanding balance becomes due after five years.
M = P × r ÷ [1 − (1 + r)−N]
Where P is original principal, r is the periodic interest rate, and N is the number of amortization payments. For a nominal annual rate with monthly payments, r = annual rate ÷ 12.
Calculate the remaining balloon balance
Bm = P(1 + r)m − M × [(1 + r)m − 1] ÷ r
Here m is the number of scheduled payments actually made before the balloon date. For a zero-interest loan, the remaining balance is simply P − mM.
Worked example: 30-year amortization, five-year balloon
| Original principal | $200,000 |
|---|---|
| Nominal annual interest rate | 7.00% |
| Monthly rate | 0.07 ÷ 12 = 0.0058333333 |
| Amortization term | 360 months |
| Payments before balloon | 60 months |
| Calculated monthly payment | $1,330.60 |
| Estimated balloon after payment 60 | $188,263.18 |
The balloon balance above assumes all 60 payments are made precisely as scheduled, at a fixed rate, without extra principal payments, fees, changes in timing, or rounding adjustments. The payoff at maturity can include additional accrued interest and amounts due under the note.
Why the balance does not equal original principal minus total payments
Every scheduled payment contains interest and principal. The interest portion is the cost of borrowing; only the principal portion reduces the loan balance. Subtracting 60 complete payments from the original principal would incorrectly treat interest as principal reduction.
How to calculate a balloon with the free tools
Use the Balloon Payment Calculator or Seller Financing Balloon Note Calculator to model actual terms and payment timing. For editing existing rows and preparing printable schedules, consider Amortization Pro.
Frequently asked questions
Is a balloon payment additional interest?
No. The balloon generally represents the outstanding amount required under the loan at maturity, which is principally remaining loan balance plus any accrued interest and permitted charges.
What if there are irregular or extra payments?
Recompute the loan balance transaction by transaction. The closed-form formula assumes level payments made at exact periodic intervals; it is not reliable for arbitrary payment dates or changing rates.