Balloon mortgages set your payment based on what it would take to pay off your loan in 30 years, but only last between 3 and 10 years. When the term comes to an abrupt end, you must pay off the remaining balance in one lump sum. For example, say it would take 30 years of $1,000 monthly payments, and your balloon mortgage only lasts five years. You make your $1,000 payments for five years and then have to pay off the remaining balance at that point. To figure the amount you'll have to pay on your last payment, you need to know the amount you're borrowing, the interest rate, and how many payments you make before your term ends.
Calculate the monthly interest rate on your balloon mortgage to calculate the monthly rate. For example, if the annual rate is 4.92 percent, or 0.0492, divide 0.0492 by 12 to get 0.0041.
Add 1 to the monthly rate. In this example, add 1 to 0.0041 to get 1.0041.
Raise the result to the number of payments you make before the balloon payment is due. For example, if you make monthly payments for 10 years, you make 120 payments. So, raise 1.0041 to the 120th power to get 1.633939791.
Multiply the result by the amount you borrowed. For example, if you took out a $250,000 balloon mortgage, multiply 1.633939791 by $250,000 to get $408,484.95.
Subtract 1 from the Step 3 result. In this example, subtract 1 from 1.633939791 to get 0.633939791.
Divide the result by the monthly rate. In this example, divide 0.633939791 by 0.0041 to get 154.6194613.
Multiply the result by the monthly payment. For this example, assume that the monthly payment on a $250,000 mortgage at 4.92 percent based on a 30-year repayment period is $1,329.86. So, multiply 154.6194613 by $1,329.86 to get $205,622.24.
Subtract the result from the amount in Step 4 to find the balloon mortgage payoff amount. In the example, subtract $205,622.24 from $408,484.95 to find your lump-sum payment is $202,862.71.
Add the amount of one monthly payment to figure the the total amount you must pay as a last payment. In this example, add $1,329.86 to $202,862.71 to find your balloon payment is $204,192.56.
Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."