Here we compare two mortgages for $80,000. The first is a 30/5 balloon mortgage. It is amortized over 30 years; has balloon payment due in 5 years; and has a fixed interest rate of 3.5%. The other mortgage is a standard 30 year fixed rate mortgage at 4.5%.
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 example, the balloon mortgage has a monthly principal and interest payment of $359 which is $46 less than the payment for the 30 year fixed. However, this 30/5 has a balloon payment of $72,117 due in 60 months. If the borrower is unable to refinance, they must be able to come up with the cash for the balloon payment. In addition to the refinance risk, the borrower also faces the risk of having to refinance at higher interest rates. The borrower will have to compare the benefit of saving $46 per month for 60 months against the much larger risk. Other factors such as the probability the borrower will sell their home before the balloon payment is due should be considered as well.
Month | Principal Interest Payment | Interest | Principal | Balance ▲ |
---|---|---|---|---|
1 | $359 | $233 | $126 | $79,874 |
2 | $359 | $233 | $126 | $79,748 |
3 | $359 | $233 | $127 | $79,621 |
4 | $359 | $232 | $127 | $79,494 |
5 | $359 | $232 | $127 | $79,367 |
6 | $359 | $231 | $128 | $79,239 |
7 | $359 | $231 | $128 | $79,111 |
8 | $359 | $231 | $128 | $78,982 |
9 | $359 | $230 | $129 | $78,854 |
10 | $359 | $230 | $129 | $78,724 |
11 | $359 | $230 | $130 | $78,595 |
12 | $359 | $229 | $130 | $78,465 |
Year 1 | $4,311 | $2,776 | $1,535 | |
13 | $359 | $229 | $130 | $78,334 |
14 | $359 | $228 | $131 | $78,204 |
15 | $359 | $228 | $131 | $78,072 |
16 | $359 | $228 | $132 | $77,941 |
17 | $359 | $227 | $132 | $77,809 |
18 | $359 | $227 | $132 | $77,677 |
19 | $359 | $227 | $133 | $77,544 |
20 | $359 | $226 | $133 | $77,411 |
21 | $359 | $226 | $133 | $77,277 |
22 | $359 | $225 | $134 | $77,144 |
23 | $359 | $225 | $134 | $77,009 |
24 | $359 | $225 | $135 | $76,875 |
Year 2 | $4,311 | $2,721 | $1,590 | |
25 | $359 | $224 | $135 | $76,740 |
26 | $359 | $224 | $135 | $76,604 |
27 | $359 | $223 | $136 | $76,468 |
28 | $359 | $223 | $136 | $76,332 |
29 | $359 | $223 | $137 | $76,196 |
30 | $359 | $222 | $137 | $76,059 |
31 | $359 | $222 | $137 | $75,921 |
32 | $359 | $221 | $138 | $75,783 |
33 | $359 | $221 | $138 | $75,645 |
34 | $359 | $221 | $139 | $75,507 |
35 | $359 | $220 | $139 | $75,368 |
36 | $359 | $220 | $139 | $75,228 |
Year 3 | $4,311 | $2,664 | $1,647 | |
37 | $359 | $219 | $140 | $75,088 |
38 | $359 | $219 | $140 | $74,948 |
39 | $359 | $219 | $141 | $74,807 |
40 | $359 | $218 | $141 | $74,666 |
41 | $359 | $218 | $141 | $74,525 |
42 | $359 | $217 | $142 | $74,383 |
43 | $359 | $217 | $142 | $74,241 |
44 | $359 | $217 | $143 | $74,098 |
45 | $359 | $216 | $143 | $73,955 |
46 | $359 | $216 | $144 | $73,811 |
47 | $359 | $215 | $144 | $73,667 |
48 | $359 | $215 | $144 | $73,523 |
Year 4 | $4,311 | $2,606 | $1,705 | |
49 | $359 | $214 | $145 | $73,378 |
50 | $359 | $214 | $145 | $73,233 |
51 | $359 | $214 | $146 | $73,087 |
52 | $359 | $213 | $146 | $72,941 |
53 | $359 | $213 | $146 | $72,795 |
54 | $359 | $212 | $147 | $72,648 |
55 | $359 | $212 | $147 | $72,501 |
56 | $359 | $211 | $148 | $72,353 |
57 | $359 | $211 | $148 | $72,205 |
58 | $359 | $211 | $149 | $72,056 |
59 | $359 | $210 | $149 | $71,907 |
60 | $72,117 | $210 | $71,907 | $0 |
Year 5 | $76,068 | $2,545 | $73,523 | |
Grand Total | $93,312 | $13,312 | $80,000 |