Balloon loans keep payments low, then a big balance comes due. See both.
A balloon mortgage calculator shows the low monthly payment on a balloon loan and the large balloon balance that comes due at the end of the term, which you must refinance, sell, or pay off.
A balloon loan bases its payment on a long amortization schedule (say 30 years) but comes due much sooner (say 5 or 7 years). The payment stays low, but because little principal is repaid, a large balance, the balloon, is owed at the end. This calculator shows both figures.
Balloon loans assume you'll refinance, sell, or pay the balloon when it comes due. That's a real risk: if rates have risen, credit has tightened, or the property has lost value, refinancing can be hard or costly. Weigh that uncertainty against the lower payments before choosing one.
A large lump-sum balance owed at the end of a balloon loan, because the low monthly payments repaid only part of the principal.
For lower monthly payments in the short term, often by borrowers who plan to sell or refinance before the balloon comes due.
You must pay it off, refinance it into a new loan, or sell the property. If you can't, you risk default, which is the main danger of balloon loans.
See the exact formula and a worked example on our methodology page.