## Amortization

The most important aspect of the balloon program is how its amortization differs from its term. For example, the conforming five-year balloon has an amortization of 30 years and a term of five years. The monthly payments are calculated with a 30-year amortization; however, at the conclusion of the five-year term, the remaining loan balance must be paid off, converted or refinanced.

With the five-year balloon loan itemized in the following matrix, the loan amount of \$100,000 has an interest rate of 7.500%, for monthly payments of \$699.21. At the conclusion of the five-year term, the remaining loan balance will be \$94,617. As you can see, the loan balance does not decrease very quickly during the first years of a 30-year amortization. This balance must be paid off, refinanced or, if applicable, converted.

Amortization table: 5-Year Balloon, \$100,000 with an interest rate of 7.500%

 1 Payment Total Monthly Principal Portion of Interest Portion of Current Balance 1 | Number Payment Payment Payment 1 \$699.21 \$74.21 \$625.00 \$99,925.79 2 \$699.21 \$74.68 \$624.54 \$99,851.11 3 \$699.21 \$75.15 \$624.07 \$99,775.96 4 \$699.21 \$75.61 \$623.60 \$99,700.35 5 \$699.21 \$76.09 \$623.13 \$99,624.26 6 \$699.21 \$76.56 \$622.65 \$99,547.70 7 \$699.21 \$77.04 \$622.17 \$99,470.66 8 \$699.21 \$77.52 \$621.69 \$99,393.13 9 \$699.21 \$78.01 \$621.21 \$99,315.13 10 \$699.21 \$78.49 \$620.72 \$99,236.63 11 \$699.21 \$78.99 \$620.23 \$99,157.64 12 \$699.21 \$79.48 \$619.74 \$99,078.17 13 \$699.21 \$79.98 \$619.24 \$98,998.19 14 \$699.21 \$80.48 \$618.74 \$98,917.71 15 \$699.21 \$80.98 \$618.24 \$98,836.73 16 \$699.21 \$81.48 \$617.73 \$98,755.25 17 \$699.21 \$81.99 \$617.22 \$98,673.26 18 \$699.21 \$82.51 \$616.71 \$98,590.75 19 \$699.21 \$83.02 \$616.19 \$98,507.73