Here we compare two mortgages for $80,000. The first is a 30/5 balloon mortgage. It is amortized over 30 years; has balloon payment due in 5 years; and has a fixed interest rate of 3.5%. The other mortgage is a standard 30 year fixed rate mortgage at 4.5%.

After reviewing this example, enter your desired mortgage terms into the balloon mortgage calculator to help you decide which mortgage best meets your needs.

(Month 60)

In this example, the balloon mortgage has a monthly principal and interest payment of $359 which is $46 less than the payment for the 30 year fixed. However, this 30/5 has a balloon payment of **$72,117** due in 60 months. If the borrower is unable to refinance, they must be able to come up with the cash for the balloon payment. In addition to the refinance risk, the borrower also faces the risk of having to refinance at higher interest rates. The borrower will have to compare the benefit of **saving $46 per month** for 60 months against the much larger risk. Other factors such as the probability the borrower will sell their home before the balloon payment is due should be considered as well.

Month | Principal Interest Payment | Interest | Principal | Balance ▲ |
---|---|---|---|---|

1 | $359 | $233 | $126 | $79,874 |

2 | $359 | $233 | $126 | $79,748 |

3 | $359 | $233 | $127 | $79,621 |

4 | $359 | $232 | $127 | $79,494 |

5 | $359 | $232 | $127 | $79,367 |

6 | $359 | $231 | $128 | $79,239 |

7 | $359 | $231 | $128 | $79,111 |

8 | $359 | $231 | $128 | $78,982 |

9 | $359 | $230 | $129 | $78,854 |

10 | $359 | $230 | $129 | $78,724 |

11 | $359 | $230 | $130 | $78,595 |

12 | $359 | $229 | $130 | $78,465 |

Year 1 | $4,311 | $2,776 | $1,535 | |

13 | $359 | $229 | $130 | $78,334 |

14 | $359 | $228 | $131 | $78,204 |

15 | $359 | $228 | $131 | $78,072 |

16 | $359 | $228 | $132 | $77,941 |

17 | $359 | $227 | $132 | $77,809 |

18 | $359 | $227 | $132 | $77,677 |

19 | $359 | $227 | $133 | $77,544 |

20 | $359 | $226 | $133 | $77,411 |

21 | $359 | $226 | $133 | $77,277 |

22 | $359 | $225 | $134 | $77,144 |

23 | $359 | $225 | $134 | $77,009 |

24 | $359 | $225 | $135 | $76,875 |

Year 2 | $4,311 | $2,721 | $1,590 | |

25 | $359 | $224 | $135 | $76,740 |

26 | $359 | $224 | $135 | $76,604 |

27 | $359 | $223 | $136 | $76,468 |

28 | $359 | $223 | $136 | $76,332 |

29 | $359 | $223 | $137 | $76,196 |

30 | $359 | $222 | $137 | $76,059 |

31 | $359 | $222 | $137 | $75,921 |

32 | $359 | $221 | $138 | $75,783 |

33 | $359 | $221 | $138 | $75,645 |

34 | $359 | $221 | $139 | $75,507 |

35 | $359 | $220 | $139 | $75,368 |

36 | $359 | $220 | $139 | $75,228 |

Year 3 | $4,311 | $2,664 | $1,647 | |

37 | $359 | $219 | $140 | $75,088 |

38 | $359 | $219 | $140 | $74,948 |

39 | $359 | $219 | $141 | $74,807 |

40 | $359 | $218 | $141 | $74,666 |

41 | $359 | $218 | $141 | $74,525 |

42 | $359 | $217 | $142 | $74,383 |

43 | $359 | $217 | $142 | $74,241 |

44 | $359 | $217 | $143 | $74,098 |

45 | $359 | $216 | $143 | $73,955 |

46 | $359 | $216 | $144 | $73,811 |

47 | $359 | $215 | $144 | $73,667 |

48 | $359 | $215 | $144 | $73,523 |

Year 4 | $4,311 | $2,606 | $1,705 | |

49 | $359 | $214 | $145 | $73,378 |

50 | $359 | $214 | $145 | $73,233 |

51 | $359 | $214 | $146 | $73,087 |

52 | $359 | $213 | $146 | $72,941 |

53 | $359 | $213 | $146 | $72,795 |

54 | $359 | $212 | $147 | $72,648 |

55 | $359 | $212 | $147 | $72,501 |

56 | $359 | $211 | $148 | $72,353 |

57 | $359 | $211 | $148 | $72,205 |

58 | $359 | $211 | $149 | $72,056 |

59 | $359 | $210 | $149 | $71,907 |

60 | $72,117 | $210 | $71,907 | $0 |

Year 5 | $76,068 | $2,545 | $73,523 | |

Grand Total | $93,312 | $13,312 | $80,000 |

- Amortization Schedule
- The amortization schedule show you how monthly principal and interest payment and principal balances change over the life of your loan.
- Balloon Term
- The Balloon term is the length of time after which the remaining principal balance on your mortgage is due. Mortgages usually have a balloon term that is the same as the amortization term. Your final payment for those mortgage may be slightly different. Mortgages where the balloon term is shorter than the amortization term are called balloon mortgages. These typically result in a very large final required payment and, thus, are much riskier mortgages.
- Interest
- The portion of your mortgage payment that is due to the interest rate being applied to the principal balance. The Total Interest for a mortgage is the sum of all interest paid over the life of a loan.
- Interest Rate
- The percentage of the principal balance of your mortgage that determines how much interest you must pay. The interest rate on your mortgage may change or remain the same depending on the type of loan you have.
- Loan Amount
- The initial principal balance or your mortgage at closing.
- Principal
- The portion of your mortgage payment that is used to pay down the current balance of your mortgage. The principal balance represents how much you owe on the mortgage.
- Term
- The amortization term is one of the key factors that determine your required mortgage payment. Your required mortgage payment for fully amortizing mortgages is the amount that would result in the mortgage being closest to being paid off by the end of the amortization term. Longer amortization terms result in lower required mortgage payments for fully amortizating mortgages, all other things being equal.