Loans and mortgages Updated November 2026

Balloon payment

A balloon loan is repaid with regular payments plus one large lump sum (the balloon) at the end. The payment is PMT = (P - B / (1 + r)^n) x r / (1 - (1 + r)^-n), where B is the balloon. With a longer amortization, the balloon is the balance left.

Syntax

PMT = (P - B x (1 + r)^-n) x r / (1 - (1 + r)^-n)

Part	What it is
`P`	Amount borrowed
`B`	Balloon paid at the end of period n
`r`	Rate per period
`n`	Number of regular payments

Examples

100,000 at 6%, 60 monthly payments, balloon 60,000
PMT = (100,000 - 60,000 / 1.005^60) x 0.005 / (1 - 1.005^-60)

Result: PMT = 1,073.31

Excel: =PMT(6%/12, 60, -100000, 60000)

100,000 at 6%, paid as a 30-year loan but due after 5 years
PMT = 599.55; balloon = balance after 60 payments

Result: Balloon = 93,054.36

Excel: =FV(6%/12, 60, 599.55, -100000)

Interest-only loan of 100,000 at 6% (balloon = full principal)
PMT = 100,000 x 0.06 / 12

Result: PMT = 500.00; balloon = 100,000

Common mistakes

Ignoring the sign convention in Excel: the balloon (fv) must have the opposite sign of the loan (pv) for PMT to be positive.
Confusing the balloon with the last regular payment; the balloon is an additional lump sum on top of (or instead of) the final scheduled payment.
Forgetting that the balloon must be refinanced or paid in cash; the low monthly payment hides a large obligation at maturity.

Practice Balloon payment

These drills check your answer on live data, free, no account needed.

Balloon paymentA $220,000 commercial real estate loan at 5.25% APR has monthly payments of $1,318.34, based on a 25-year amortization. The loan matures after 10 years. What balloon payment is due at maturity, on top of the last regular payment?
Balance after k paymentsA $105,000, 30-year mortgage at 4.25% APR has a monthly payment of $516.54. What is the balance right after payment 180?

Questions

Why do balloon loans have lower payments?

Because part of the principal is not amortized; it is deferred to the lump sum at the end. The payment only has to cover interest plus the principal reduction down to the balloon.

How do I find the balloon amount if I know the payment?

It is the remaining balance after n payments: B = P x (1 + r)^n - PMT x ((1 + r)^n - 1) / r, or =FV(r, n, PMT, -P) in Excel.

Remaining loan balanceThe balance after k payments is the present value of the payments still to come: B_k = PMT x (1 - (1 + r)^-(n-k)) / r. Mortgage and car loan examples, Excel.
Mortgage payment formulaHow to calculate a monthly mortgage payment with M = P x r / (1 - (1 + r)^-n). Examples for 200,000 at 6% and 300,000 at 5%, Excel PMT and common mistakes.
Amortization scheduleAn amortization schedule splits each payment into interest and principal and tracks the balance. Worked schedule for a 10,000 loan, Excel IPMT and PPMT.
Present value of an annuityHow to find the present value of equal payments with PV = PMT x (1 - (1 + r)^-n) / r. Worked examples, Excel PV and why this is the loan formula in disguise.