How to calculate a balloon payment

A balloon loan has payments worked out as if it ran for decades, but the whole remaining balance is due much sooner.

Problem

A $250,000 loan at 7% has payments based on 30 years, but it’s due in full after 7 years. How big is the balloon?

Keystrokes

fFINx≷y
0.00
Start clean.
30g12×n
360.00
The 30-year schedule the payments are based on.
7g12÷i
0.58
Monthly rate.
250000PV
250,000.00
The amount borrowed.
PMT
−1,663.26
The monthly payment.
7g12×n
84.00
Now only 84 payments are actually made.
FV
−227,868.54
The balance still owed after them: the balloon.

Answer

The payment is $1,663.26 a month, and after 84 payments a balloon of $227,868.54 is due, on top of the last regular payment.

Why it works

Changing n from 360 to 84 while keeping the payment asks a different question: if you pay this amount 84 times, what’s left? Since FV is the only unknown, FV answers it. It’s negative because it’s money you still have to pay.

Matching a lender’s schedule

Lenders round the payment to the cent. For a balance that matches theirs to the penny, key the rounded payment with CHSPMT before changing n.

Questions

Is this the same as the remaining balance on a normal loan?

Yes. The balloon is just the remaining balance at the date the loan comes due. The same steps give the payoff amount of any loan after a given number of payments.