BALLOON PAYMENT RETOTD Episode 00114

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Real Estate Term Of The Day Logo

BALLOON PAYMENT
The final payment of the balance due on a partially amortized loan. A loan with monthly payments too low to pay off the balance in the specified term. The balance must be paid in full when the loan comes due — typically within three to five years. An installment payment which is larger (most often much larger) than the other scheduled payments. It is usually the last payment. If a note is written for $50,000 at a fixed 9.0% rate of interest with payments based on an amortization schedule of 30 years and a balloon payment due in 5 years, the first 60 payments will each be $402.31 (the normal payment for a 30 year loan at 9.0% interest) and the last payment will be $47,940.15 which will be the outstanding balance remaining after the 60th payment.

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