Balloon Mortgage Calculator



 
 

Balloon Mortgage Calculator

This balloon mortgage calculator allows you to vary both the term and interest rate then calculates the mortgage balance owed (balloon) at the end of the payment term.

A balloon mortgage is usually rather short, with a term of 5 years to 7 years, but the payment is based on a term of 30 years. The advantage is they usually offer a lower interest rate and can be easier to qualify for than a traditional 30-year-fixed mortgage. However, beware of the risk because you will either need to refinance or pay off your outstanding balance at the end of the term.

When you are done calculating you can print an amortization schedule showing all payments and the final balloon.

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Mortgage loan amount:
Annual interest rate (APR):
Desired monthly mortgage payment :
Years before loan balloons:
Mortgage balloon after specified number of years:

What Will Your Balloon Mortgage Payment Be At The End Of The Term?

Are you considering getting a balloon mortgage?

Don’t know how much you’ll owe at the end of the term?

The Balloon Mortgage Calculator makes it easy to find out how much you’ll owe for your last payment – the largest payment of your balloon mortgage.

Simply enter in your mortgage loan amount, annual interest rate (APR), desired monthly mortgage payment, and the number of years before the loan balloons. Compute the balloon at the end of the term and even print out an amortization schedule to keep for handy reference.

Learn what you need to know about balloon mortgages before you sign up . . . .

What Is A Balloon Mortgage?

A balloon mortgage is a mortgage in which a large portion of the borrowed principal is repaid in a single payment at the end of the loan period. This large payment is called the balloon payment.

Balloon mortgages are often used when a borrower expects a large cash inflow as a result of refinancing or selling the property before the end of the loan term.

Just like any other type of mortgage, this loan type also carries some risk. Before you decide to take such a loan, make sure you’ll be able to make the balloon payment before the due date.

How Does A Balloon Mortgage Work?

Balloon mortgages usually have lower interest rates and monthly payments than fixed-rate mortgages.

However, when making balloon mortgage payments, the majority of each payment will go toward interest, not principal.

That’s because while a balloon mortgage might last, say, seven years, the payments are calculated using a longer term.

Balloon mortgages are sometimes confused with adjustable-rate mortgages. One difference is that a balloon mortgage may require refinancing or repayment at the end of the term whereas some adjustable-rate mortgages don’t need to be refinanced.

What Are The Benefits?

It’s not enough to understand how balloon mortgages work. Explore the pros and cons to determine if they are right for you! Here are some nice benefits to start:

  • Balloon mortgages have relatively lower interest rates and monthly payments compared to other mortgages.
  • Balloon mortgages allow the poor (or those with bad credit) the ability to finance a home.
  • If the borrower has a good investing skills, they can use the money saved to put toward investments. Another option is to use the extra money to pay other high-interest loans.
  • Borrowers are often offered a non-negotiable predetermined refinance option in case they have difficulty with the balloon payment. In this case, the borrower will have a chance to refinance the loan with another lender, thus giving them an opportunity to negotiate a new loan at a better interest rate.

What Are The Drawbacks?

Balloon mortgages can be risky, here’s how:

  • At the end of your loan term, you’ll have to pay the hefty balloon mortgage payment. If you do not get the money you expected to pay the balloon payment, refinance your loan, or sell it at the end of the loan term, you may have to go through a foreclosure.
  • If you pay off the loan or opt to refinance the loan, and then the home values fall, you will have a substantial loss.
  • If you decide to convert it to a conventional mortgage, expect that your new mortgage to have a higher interest rate.
  • In case of default or foreclosure, you should expect that your credit score will suffer which will make it harder for you to obtain another mortgage in the future.

Final Thoughts

While balloon mortgages have low monthly payments, they can be a ticking time bomb – never forget about that large balloon payment at the end of the term.

If you are unsure that you will be able to handle the large payment at the end of the loan term, don’t apply for this mortgage.

Use the Balloon Mortgage Calculator to discover how much you’ll have to pay. If you feel hesitation in the slightest, consider a fixed-rate or adjustable-rate mortgage.

Balloon Mortgage Calculator Terms & Definitions

  • Mortgage – The charging of real (or personal) property by a debtor to a creditor as security for a debt (esp. one incurred by the purchase of the property), on the condition that it shall be returned on payment of the debt within a certain period.
  • Balloon Mortgage – A mortgage in which a large portion of the borrowed principal is repaid in a single payment at the end of the loan period.
  • Balloon Payment – A repayment of the outstanding principal sum made at the end of a loan period.
  • Default – Failure to fulfill an obligation, like a mortgage agreement.
  • Foreclosure – The process of taking possession of a mortgaged property as a result of the mortgagor’s failure to keep up mortgage payments.
  • Mortgage Payment – A regularly scheduled payment which includes principal and interest paid by the borrower to the lender of a home loan.
  • Adjustable-Rate Mortgage (ARM) – A mortgage whose interest rate is adjusted periodically to reflect market conditions.
  • Fixed-Rate Mortgage – A mortgage whose interest rate does not adjust during the loan term.
  • Loan Term – Period over which a loan agreement is in force.
  • Interest Rate – An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender.
  • Principal – Denoting an original sum lent.
  • Refinance – Financing a mortgage again, typically with a new loan at a lower rate of interest.
  • Amortization – The spreading of payments over multiple periods.
  • Borrower – The person who borrows money with a promise to return it with interest.
  • Lender – The person who gives money for interest with the expectation that the principal will be paid back.

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