How to Calculate Balloon Payment

Balloon payments means that method of loan payment in which the amount is paid back when the loan comes to its deadline set for the repayment at the time of the granting of loan. If you have taken a loan and you intend to pay it back when it will come to its contractual maturity then you should know how to calculate balloon payment.

Balloon payments are also called as bullet payments. These payments are common for some specific types of debt. Generally bonds are paid as balloon payments. Here, in this type of loans, interests are paid in coupon payments and the full amount of the bond’s face value is paid at final maturity.

A balloon mortgage is that type of loan which has a 5 to 10 years term and in that duration, the monthly payments are significantly lower in interest. At the end of the loan term, the remaining amount of the loan is due and is paid by refinancing or by selling the property. This balance is said to be the balloon payment. You should compute your balloon mortgage in order to find out how much amount you have to pay each month and what will be the remaining balloon payment amount at the end of the term.

In this article, you will get to know how to calculate balloon payment.

Steps for calculation

Step 1.

You should consult with your real estate agent, local financial institution or your mortgage lender for a mortgage calculator. You can also search for a free mortgage calculator online. A mortgage calculator needs only your loan amount, interest rate and loan terms to find out your payments.
Step 2.

Now you have to enter the entire amount of your loan into the respective blank field in the calculator. Now enter the term of your loan in the respective field. After this enter your interest rate and any pre-payments which you have made for the loan. Now click on the submit or calculate button and the balloon payment calculator will show you the number of monthly payments you have to make, how much will be the amount of each payment, and the total amount of money you need to pay for the loan by the end of the term. In addition to this, the balloon payment calculator also displays your balloon payment, which is the remaining amount which you have to pay off at the end of the loan term.

It is important to know how to calculate balloon payment if you are not paying in installments and want to pay the whole sum of money at one time. For that condition, calculation of balloon payment is must to know. I hope this article would have proved helpful in calculating balloon payment.

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