Calculate the monthly payment and balloon payment of a partially amortized loan: the payment uses a longer full amortization term, leaving an unpaid balance (balloon) at the shorter maturity.
Input Data
Results
At a glance:A partially amortized loan pays only interest sufficient for a long amortization schedule, leaving a large remaining balance (balloon) payable at the shorter actual maturity.
Formula
monthlyPayment = P × r·(1+r)^F / ((1+r)^F − 1) (r = annualRate%/12, F = fullTermMonths)
balloonPayment = remaining balance after actualTermMonths of monthlyPayment
$$r = \\dfrac{\\text{Annual rate}\\%}{12}$$How to Use
- Enter the loan principal and annual rate.
- Enter the full amortization term and the actual maturity.
- Review the monthly payment and the balloon payment.
FAQ
What is a partially amortized loan and how is it different from a normal loan?
Contrast two extremes. A 'fully amortized loan' (the familiar home mortgage) has fixed monthly payments that clear principal and interest exactly by the end of the term (e.g. 30 years), leaving zero balance and no balloon. An 'interest-only loan' pays only interest during the term, so the principal is untouched and repaid in full at maturity. A 'partially amortized loan' sits between them: the monthly payment is computed on a longer amortization term (as if it were a 30-year loan), so the payment is low; but the loan's actual term is much shorter (e.g. 5 years). Because you pay down principal slowly on the long schedule, a large balance remains at the actual maturity and must be paid off in one lump — the 'balloon payment'. So: partially amortized = lower monthly payment + a large lump sum at the end. This structure is common in commercial real estate and some mortgage products.
How are the monthly payment and the balloon computed?
Two steps. First, the monthly payment uses the FULL amortization term, not the actual term, via the standard annuity formula: payment = P × r ÷ (1 − (1+r)^−F), where r = annual rate ÷ 12 and F = full term in months. With P = 1,000,000, 6% (r = 0.5%), F = 360, the payment is about HK$5,995.51 — exactly what a true 30-year loan would pay, which is why the payment is low. Second, the balloon is the remaining principal at the actual maturity: balloon = P×(1+r)^t − payment × ((1+r)^t − 1) ÷ r, where t = actual term months. With t = 60, the balloon is about HK$930,543.57 — after 5 years, about HK$930k of the HK$1m is still owed. Because you amortize on a 30-year pace, principal falls only ~HK$70k in 5 years; most of the payment was interest, which is why the balloon is so large.
What are the pros and cons, who is it for, and what are the risks?
The big advantage is a light monthly burden — the payment is far lower than a fully amortized loan of the same actual term, easing cash-flow pressure during the loan. It suits: (1) commercial-property investors who plan to sell or refinance within a few years; (2) borrowers expecting a future lump sum (bonus, inheritance, asset sale, rising income); (3) those intending to refinance at maturity. The risks are serious: the largest is that you must produce a huge sum at maturity — if you lack cash and cannot refinance or sell, you face default and may lose the collateral; refinancing risk (rates may rise or your credit/asset condition may worsen); overall interest can be high because you pay mostly interest early; and market risk if you rely on selling an asset that may have depreciated. Use it only if you have a clear, reliable plan for the balloon. Read the contract terms carefully.
Which Hong Kong loans use a balloon structure, and what is the biggest risk?
In Hong Kong, the 'partial amortization + balloon' structure is most common in commercial-property loans and some non-standard mortgages / bridging finance, and occasionally in equipment or corporate finance. Its appeal is the low payment and easy early cash flow, ideal for borrowers planning to sell the property, refinance after appreciation, or expecting a lump sum. But the biggest risk is having to produce a large sum at maturity — the balloon often reaches 80-90% of the original loan; if you have neither cash nor a successful refinance or sale, you face severe distress and possible loss of the collateral. There is also refinancing risk (rates may rise or your profile may worsen) and market risk (asset may depreciate). Plan the maturity source thoroughly and realistically before taking on a balloon; do not rely on hope.
Why does the principal barely fall after years of payments?
This is the most misunderstood part. The payment is computed on a very long amortization term (e.g. 360 months), and under an annuity schedule the early payments are mostly interest with little principal — principal accelerates down only in the middle and later years. With P = 1,000,000 at 6%, the payment is about 5,996, of which the first month's interest alone is 1,000,000 × 0.5% = 5,000, leaving only ~996 to principal. So after 5 years on the 30-year pace, principal has fallen only ~HK$69k and the balloon is still ~HK$930k. Two lessons: the low payment is essentially 'mostly interest, slow principal' bought with time; and if you hold to the balloon then refinance or sell, the long-run interest may not be cheap. Always look at both the monthly payment and the balloon, and confirm you can handle the latter.
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.