In this example, we compare two mortgages for $70,000. The first mortgage in the comparison, a 30/3 balloon mortgage, has the following features: amortized over 30 years; balloon payment due in 3 years; and fixed rate of 3.25%. The other mortgage in the comparison is a standard 30 year fixed rate mortgage at 4.25%.
After reviewing this example, enter your desired mortgage terms into the balloon mortgage calculator to help you decide which mortgage best meets your needs.
In this case the balloon mortgage has a slightly lower monthly principal and interest payment of $305 than the $344 for the 30 year fixed. However, the balloon mortgage has a balloon payment of $65,960 due in 36 months. Even if the borrower is able to refinance they may be forced to do so at a significantly higher interest rate since market conditions or the borrower's personal situation may be different after 3 years. If the borrower is unable to refinance, they must be able to come up with the cash for the balloon payment.
Month | Principal Interest Payment | Interest | Principal | Balance ▲ |
---|---|---|---|---|
1 | $305 | $190 | $115 | $69,885 |
2 | $305 | $189 | $115 | $69,770 |
3 | $305 | $189 | $116 | $69,654 |
4 | $305 | $189 | $116 | $69,538 |
5 | $305 | $188 | $116 | $69,422 |
6 | $305 | $188 | $117 | $69,305 |
7 | $305 | $188 | $117 | $69,188 |
8 | $305 | $187 | $117 | $69,071 |
9 | $305 | $187 | $118 | $68,953 |
10 | $305 | $187 | $118 | $68,835 |
11 | $305 | $186 | $118 | $68,717 |
12 | $305 | $186 | $119 | $68,598 |
Year 1 | $3,656 | $2,254 | $1,402 | |
13 | $305 | $186 | $119 | $68,480 |
14 | $305 | $185 | $119 | $68,360 |
15 | $305 | $185 | $120 | $68,241 |
16 | $305 | $185 | $120 | $68,121 |
17 | $305 | $184 | $120 | $68,001 |
18 | $305 | $184 | $120 | $67,880 |
19 | $305 | $184 | $121 | $67,760 |
20 | $305 | $184 | $121 | $67,638 |
21 | $305 | $183 | $121 | $67,517 |
22 | $305 | $183 | $122 | $67,395 |
23 | $305 | $183 | $122 | $67,273 |
24 | $305 | $182 | $122 | $67,151 |
Year 2 | $3,656 | $2,208 | $1,448 | |
25 | $305 | $182 | $123 | $67,028 |
26 | $305 | $182 | $123 | $66,905 |
27 | $305 | $181 | $123 | $66,781 |
28 | $305 | $181 | $124 | $66,658 |
29 | $305 | $181 | $124 | $66,533 |
30 | $305 | $180 | $124 | $66,409 |
31 | $305 | $180 | $125 | $66,284 |
32 | $305 | $180 | $125 | $66,159 |
33 | $305 | $179 | $125 | $66,034 |
34 | $305 | $179 | $126 | $65,908 |
35 | $305 | $178 | $126 | $65,782 |
36 | $65,960 | $178 | $65,782 | $0 |
Year 3 | $69,311 | $2,160 | $67,151 | |
Grand Total | $76,623 | $6,623 | $70,000 |