Question

You have just arranged for a $1,760,000 mortgage to finance the purchase of a large tract of land. The mortgage has an APR of 7.6 percent, and it calls for monthly payments over the next 25 years. However, the loan has an eight-year balloon payment, meaning that the loan must be paid off then. How big will the balloon payment be?

Answer 1

$1,500,257.38

Explanation:

The balloon payment will be the balance on the loan after 8 years worth of payments have been made. The normal payment amount is the value calculated for a 25-year loan. A spreadsheet, financial calculator, or app can simplify this for you. In the attached, we have used the financial functions available on a TI-84 calculator.

The normal monthly payment will be $13,120.94.

After 8 years, the remaining balance will be $1,500,257.38. This is the size of the balloon payment.