Balloon Mortgage Calculator

Although not many home buyers opt for balloon mortgages (and with good reason - they are risky), the balloon mortgage calculator can actually be very handy for most home buyers. Here's how.

Looking for something different? We've probably got you covered. Use our quick mortgage calculator guide to find the right tool for you.

First things first.

Balloon mortgages

A balloon mortgage is simply a mortgage amortized over a long term (usually 30 years), but on which a large lump payment of the principal must be made at some point before that.

Most home buyers who opt for a balloon mortgage don't end up making the big payment. Instead, they sell the house or refinance the remaining principal. Balloon mortgages are risky because there is always the chance you won't move, or won't or can't refinance. So the mortgages themselves are not popular.

But the balloon mortgage calculator can be quite valuable.

How the calculator works

This calculator computes the monthly payment, balloon payment, total loan cost, and total financing costs on a balloon mortgage. To run it, you'll need to know the loan amount, loan term, and interest rate.

So, how is this useful to most home buyers? Well, most home owners don't keep their mortgage for its full term. Most move or refinance within the first ten years. In either case, they're effectively paying off the original mortgage as though it were a balloon loan.

The balloon mortgage calculator can come in handy for home buyers who have a good idea of when they'll be moving or refinancing, because it allows you to see the true financing cost on the mortgage, not what they would be were you keep the mortgage for its duration.

It is especially helpful for estimating the financing costs on the initial fixed period of a hybrid ARM. Often, the savings during this time are eclipsed by the higher interest rate charged during the remainder of the loan. If, however, the mortgage is paid off before the rate is adjusted, they have no effect.

Try the balloon mortgage calculator now.

More mortgage payment calculator tips

This mortgage payment calculator is intended for estimation purposes. Don't budget too tightly, and be sure and leave some wiggle room on loan amount and interest rate, especially if you haven't already been approved.

Consider applying for preapproval before you plan to closely. That way you can nail down an interest rate and use the mortgage payment calculator to design your loan around it.