In this example, we will compare two mortgages for $90,000. The first is a 30/7 balloon mortgage. It is amortized over 30 years. The balloon payment is due in 7 years. Its interest rate is fixed at 4%. The next mortgage is a 30 year fixed rate mortgage at 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.
The balloon mortgage has a minimum monthly principal and interest payment of $430. This saves the borrower $53 per month when compared to the 30 year fixed. However, the 30/7 has a balloon payment of $77,883 due in 84 months. The borrower will have to compare the monthly savings of $53 for 84 months with absorbing the significantly higher risk of the balloon mortgage, including the refinance risk, the interest rate risk and risk of not being able to sell the home at a high enough price if they must raise the cash that way.
Month | Principal Interest Payment | Interest | Principal | Balance ▲ |
---|---|---|---|---|
1 | $430 | $300 | $130 | $89,870 |
2 | $430 | $300 | $130 | $89,740 |
3 | $430 | $299 | $131 | $89,610 |
4 | $430 | $299 | $131 | $89,479 |
5 | $430 | $298 | $131 | $89,347 |
6 | $430 | $298 | $132 | $89,215 |
7 | $430 | $297 | $132 | $89,083 |
8 | $430 | $297 | $133 | $88,950 |
9 | $430 | $296 | $133 | $88,817 |
10 | $430 | $296 | $134 | $88,684 |
11 | $430 | $296 | $134 | $88,549 |
12 | $430 | $295 | $135 | $88,415 |
Year 1 | $5,156 | $3,571 | $1,585 | |
13 | $430 | $295 | $135 | $88,280 |
14 | $430 | $294 | $135 | $88,145 |
15 | $430 | $294 | $136 | $88,009 |
16 | $430 | $293 | $136 | $87,872 |
17 | $430 | $293 | $137 | $87,736 |
18 | $430 | $292 | $137 | $87,598 |
19 | $430 | $292 | $138 | $87,461 |
20 | $430 | $292 | $138 | $87,323 |
21 | $430 | $291 | $139 | $87,184 |
22 | $430 | $291 | $139 | $87,045 |
23 | $430 | $290 | $140 | $86,905 |
24 | $430 | $290 | $140 | $86,765 |
Year 2 | $5,156 | $3,507 | $1,650 | |
25 | $430 | $289 | $140 | $86,625 |
26 | $430 | $289 | $141 | $86,484 |
27 | $430 | $288 | $141 | $86,343 |
28 | $430 | $288 | $142 | $86,201 |
29 | $430 | $287 | $142 | $86,058 |
30 | $430 | $287 | $143 | $85,916 |
31 | $430 | $286 | $143 | $85,772 |
32 | $430 | $286 | $144 | $85,629 |
33 | $430 | $285 | $144 | $85,484 |
34 | $430 | $285 | $145 | $85,340 |
35 | $430 | $284 | $145 | $85,194 |
36 | $430 | $284 | $146 | $85,049 |
Year 3 | $5,156 | $3,439 | $1,717 | |
37 | $430 | $284 | $146 | $84,902 |
38 | $430 | $283 | $147 | $84,756 |
39 | $430 | $283 | $147 | $84,609 |
40 | $430 | $282 | $148 | $84,461 |
41 | $430 | $282 | $148 | $84,313 |
42 | $430 | $281 | $149 | $84,164 |
43 | $430 | $281 | $149 | $84,015 |
44 | $430 | $280 | $150 | $83,865 |
45 | $430 | $280 | $150 | $83,715 |
46 | $430 | $279 | $151 | $83,565 |
47 | $430 | $279 | $151 | $83,414 |
48 | $430 | $278 | $152 | $83,262 |
Year 4 | $5,156 | $3,369 | $1,787 | |
49 | $430 | $278 | $152 | $83,110 |
50 | $430 | $277 | $153 | $82,957 |
51 | $430 | $277 | $153 | $82,804 |
52 | $430 | $276 | $154 | $82,650 |
53 | $430 | $276 | $154 | $82,496 |
54 | $430 | $275 | $155 | $82,341 |
55 | $430 | $274 | $155 | $82,186 |
56 | $430 | $274 | $156 | $82,030 |
57 | $430 | $273 | $156 | $81,874 |
58 | $430 | $273 | $157 | $81,717 |
59 | $430 | $272 | $157 | $81,560 |
60 | $430 | $272 | $158 | $81,402 |
Year 5 | $5,156 | $3,297 | $1,860 | |
61 | $430 | $271 | $158 | $81,244 |
62 | $430 | $271 | $159 | $81,085 |
63 | $430 | $270 | $159 | $80,926 |
64 | $430 | $270 | $160 | $80,766 |
65 | $430 | $269 | $160 | $80,605 |
66 | $430 | $269 | $161 | $80,444 |
67 | $430 | $268 | $162 | $80,283 |
68 | $430 | $268 | $162 | $80,121 |
69 | $430 | $267 | $163 | $79,958 |
70 | $430 | $267 | $163 | $79,795 |
71 | $430 | $266 | $164 | $79,631 |
72 | $430 | $265 | $164 | $79,467 |
Year 6 | $5,156 | $3,221 | $1,935 | |
73 | $430 | $265 | $165 | $79,302 |
74 | $430 | $264 | $165 | $79,137 |
75 | $430 | $264 | $166 | $78,971 |
76 | $430 | $263 | $166 | $78,805 |
77 | $430 | $263 | $167 | $78,638 |
78 | $430 | $262 | $168 | $78,470 |
79 | $430 | $262 | $168 | $78,302 |
80 | $430 | $261 | $169 | $78,133 |
81 | $430 | $260 | $169 | $77,964 |
82 | $430 | $260 | $170 | $77,794 |
83 | $430 | $259 | $170 | $77,624 |
84 | $77,883 | $259 | $77,624 | $0 |
Year 7 | $82,609 | $3,142 | $79,467 | |
Grand Total | $113,546 | $23,546 | $90,000 |