Financing
Balloon payment
A balloon payment is a large one-time amount due near the end of a loan because the earlier scheduled payments did not fully pay down the principal.
Glossary
Financing
What is a balloon payment on a mortgage?
Primary references on this page:
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CFPB Regulation Z: Loan Estimate disclosuresA loan can use a long amortization schedule to set the monthly payment but require payoff after a shorter term. The unpaid principal then becomes due at the balloon date. The CFPB warns borrowers not to assume they will be able to refinance when that date arrives.
How balloon payment works
Calculate the scheduled principal-and-interest payment from the amortization period, apply each payment through the balloon month, and treat the remaining principal balance as the modeled balloon. The contractual payoff can also include accrued interest, fees, or other amounts, so a calculator is not a payoff statement.
Formula: balloon balance = original principal grown at the monthly rate through the balloon month − scheduled payment × annuity accumulation factor
Worked example
A $300,000 loan amortized over 30 years but due after 5 years has 60 scheduled monthly payments followed by the remaining principal. At 6% interest, the modeled payment is about $1,798.65 and the balance after payment 60 is about $279,163. The signed note controls the real due amount and date.
Common mistakes and review checks
Treat the result or document as one input to a decision. Verify the current source document, definitions, dates, and transaction facts before relying on it.
This is general educational information, not legal or tax advice. Rules vary by state and locality and change over time — check your local law and confirm specifics with a qualified professional.