10-Year Balloon Mortgage Calculator

How a 10-year balloon mortgage works

A 10-year balloon mortgage is paid like a longer loan and called due like a short one. The monthly payment is calculated as if the loan ran 30 years, but the remaining balance comes due in a single lump sum at the end of year 10. That lump sum is the balloon.

The payment does reduce the balance. It does it slowly. On $300,000 at 6.75% with a 30-year amortization, the payment is $1,945.79. After 120 payments, $255,903.00 is still owed, which means the borrower retired $44,097.00 of principal, or 14.7% of the loan, in a decade.

That is the trade. A 10-year fixed loan at 6.5% costs $3,406.44 a month and ends with a zero balance. The balloon costs $1,460.65 less each month and ends with a bill for a quarter of a million dollars.

Lenders offer the structure because it caps their interest rate risk: the loan is repaid or repriced at year 10 instead of running 30 years. Borrowers take it because the payment fits, usually on a rental property, a piece of land, or a business asset that is expected to be sold or refinanced before the balloon date.

The payment and the balloon, step by step

Start with the monthly rate: 6.75% divided by 12 is 0.005625. The payment on a fully amortizing loan is the principal times the monthly rate, divided by one minus (one plus the monthly rate) raised to the negative number of payments. With 360 payments, $300,000 at 0.005625 gives $1,945.79.

Month one splits into $1,687.50 of interest and $258.29 of principal. The interest share falls slowly because the balance falls slowly. Sixty payments in, the balance is $281,627.13, so the first five years retired $18,372.87. The next five retire $25,724.13, and the loan still has $255,903.00 outstanding on the balloon date.

Run the same math on other balances and the shape holds. On a 30-year schedule, a 10-year balloon leaves roughly 85% of the original loan unpaid.

The last two columns are the ones to read together. The $400,000 loan is a third larger than the $300,000 loan and its balloon is 34% larger, because the extra debt is retired at the same glacial pace.

Balloon against fixed terms on the same $300,000

Put the balloon beside the three fixed terms a borrower would be quoted. The table uses rates from late 2026, when short fixed terms priced below the 30-year benchmark. Freddie Mac's Primary Mortgage Market Survey put the 30-year fixed at 7.24% in the week ending October 29, 2026.

Over the first ten years the balloon borrower sends the lender $233,494.80 in payments and still owes $255,903.00, a total outlay of $489,398.31. The 10-year fixed borrower sends $408,772.72 and is finished. Same house, $80,625.59 more for the balloon path, unless the balloon is refinanced at a better rate than the original note.

Against the 30-year fixed, the balloon wins on both lines: the payment is $100.74 lower and the balance at year 10 is $3,028.05 lower. That is the honest case for the product. It beats a 30-year loan on cost and beats a 10-year loan on cash flow. The catch is the $255,903 that has to be found, borrowed or renegotiated at whatever rates exist that month.

What happens at year 10: the refinance math

Most borrowers do not pay the balloon in cash. They refinance it, and the cost of that refinance is the second half of the loan's story. The table prices a 20-year refinance of the $255,903 balance at three rates.

At 7.25%, the balloon plus the refinance costs $718,918.80 in total payments. A 30-year fixed at 7.24% taken at closing would have cost $736,016.40. The balloon path is $17,097.60 cheaper, a real but thin margin for carrying refinance risk for a decade.

At 8.5%, the refinance costs $532,989.60 and the lifetime total rises to $766,484.40, about $30,468 more than the 30-year. Two points of rate movement at the wrong moment erase the entire advantage of the lower payment.

A lender that extends the loan instead of refinancing it usually charges for the privilege. One point on $255,903 is $2,559.03, and the extension rate is often set above the original note rate, so the payment can rise even though nothing about the property changed.

The amortization term sets the size of the balloon

Two dials set the loan: the rate and the amortization schedule. Shortening the schedule raises the payment and shrinks the balloon, which is the only lever a borrower controls at closing.

Moving from a 30-year to a 20-year schedule costs $335.30 more a month and cuts the balloon by $57,243.33. Moving to 15 years costs $708.94 more a month and cuts the balloon by $121,031.98, but at $2,654.73 the payment is close to a 15-year fixed loan, and the balloon structure buys little at that point.

Interest over the ten years falls with the schedule, from $189,397.80 to $172,390.47 to $153,438.62, because the balance is smaller every month. That is the same reason the balloon is smaller: less debt outstanding means less interest and more principal in each payment.

Where 10-year balloons still exist in 2026

The ability-to-repay rule that took effect in 2014 made balloon loans hard to sell as qualified mortgages. A loan with a balloon payment generally cannot be a QM, with a narrow exception that lets small creditors make balloon loans in rural or underserved areas and keep them in portfolio. The CFPB text of Regulation Z on ability to repay sets out that exception, and the QM explainer covers the general rule.

In practice the structure survives in five places:

• Investor and DSCR loans. Rental loans underwritten on rent rather than personal income often carry 5, 7 or 10-year terms with 30-year amortization.
• Land and lot loans. Raw land produces no income, so lenders shorten the term and price in a balloon.
• Bridge and construction loans. The balloon is timed to the sale of the finished property.
• Small banks and credit unions. A lender that holds the loan on its own books can write a balloon the secondary market will not buy.
• Seller financing. A private note often carries a 10-year call so the seller is not locked in for three decades.

Pricing sits above agency mortgages. A 10-year balloon on a rental property commonly prices 0.75 to 2 points above a conforming 30-year, and non-QM products often carry a prepayment penalty: 3%, 2% and 1% of the balance in years one through three, or a 5-4-3-2-1 schedule. On $300,000, a 3% penalty in year one is $9,000, which is more than a year of the payment savings against a 30-year loan. Ask for the penalty schedule in writing before comparing rates.

The exit plan belongs in writing before you sign

The loan is only as good as the plan for year 10. Four items belong in the file:

• A dated maturity. The exact date, not "year 10", plus the balance projection the servicer will use.
• Extension terms. Whether the lender will extend, for how long, at what rate and for what fee. A one-year extension at one point on $255,903 costs $2,559.03.
• A refinance start date. Begin 12 to 18 months before maturity. A rental refinance needs an appraisal, title work and 30 to 45 days of underwriting, and a weak rent roll can sink it.
• Cash reserves. Six months of payments plus enough to absorb a rate shock. On $255,903 over 20 years, 7.25% costs $2,022.60 a month and 9.25% costs $2,343.73.

If any of the four is missing, a 30-year fixed with voluntary extra principal is the safer instrument. At 7.25%, adding $1,360 a month to the 30-year payment retires the balance in 127 months, close to the balloon schedule, and the extra payment can stop in a bad month without triggering a default.

One last check: confirm in writing that the loan has no prepayment penalty, or know exactly what it is. Paying a balloon loan off early is the best outcome for the borrower and the one lenders are most likely to charge for.