Advantage of Balloon Payment Home Loan – Calculator Excel Download File

balloon-payment-home-loan-calculator-excelBalloon payments are a great way to reduce your monthly payment outgo, in case you are expecting to receive a large sum of money at a future date. This receipt of large sum can be utilized to prepay your outstanding loan balance at that time and close your home loan.

Basic Advantage of Balloon Payment Home Loan

The basic purpose of balloon payment home loans is to reduce your calculated EMI’s by shifting the burden of servicing the loan to a future date. This reduces your monthly outgo requirement to a large extent and thus makes you qualify for a larger amount of home loan even in case your current monthly income is less.

Here we present you an online balloon payment home loan calculator, which will allow you to calculate the balloon payment after the completion of the loan period and regular payment of EMI is during that period. This calculator also adjusts itself for the case when you are in a position to make some extra payments along with your EMI in order to reduce the loan tenure and reduce the overall interest burden.

Download Balloon Payment Loan Calculator

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Assumptions:

  • Loan amount = Rs. 25 lakhs
  • Annualised interest rate = 10.5%
  • Loan period in years = 20 years
  • Ballone period in years = 14 years
  • Optional extra payments = Rs. 1200 per month along with EMI

The optional extra payments along with EMI of Rs. 1200 per month is being made voluntarily to reduce the loan in your and overall interest burden.

The calculated results

  • Calculated EMI = Rs. 24,959
  • Schedule the number of payments = 240 (corresponding to 20 years of total loan period)
  • Reduced number of payments because of optional extra payments = 208
  • Balloon payment amount = Rs. 8,17,564

This Balloon payment amount of Rs. 8,17,564 is the outstanding loan balance after the payment of regular EMI till the completion of 14 years. Please note that in this calculation, an optional extra payment of Rs. 1200 per month along with the EMI has been considered. In case you prefer not to pay the optional extra payments, then this amount will be on a higher side, which can be calculated by entering a value of zero in the optional extra payment field.

How Balloon Payment Loans are Useful

Let’s compare the above example with the situation when he decides to take a normal home loan of loan period as 14 years and all other parameter is remaining unchanged. In this case we will find that the scheduled monthly payment (EMI) comes out to be Rs. 28,461, which is quite high as compared to the earlier EMI of only Rs. 24,959.

We have already discussed the calculations done by most banks for arriving at the loan eligibility amount and therefore we know that the loan eligibility depends upon the ratio of your present income to the proposed EMI. Since the EMI in case of balloon payment loan is less as compared to the normal home loan, it means that the balloon payment home loan will allow the person to borrow a larger amount even with the same income levels.

We encourage you to download the MS Excel balloon payment home loan calculator by clicking on the download link given above. This will allow you to play around with the figures and you will be able to better understand how the balloon payment amount is being calculated.

Demerits of Balloon Payment Home Loan

On the face of it, Balloon loan payment home loans look like a great product to avail a large home loan easy in without having commensurate monthly incomes to pay for the resultant high EMI. But they are required to be handled very carefully. It is not uncommon for the people to falter on the balloon payments because of their large amounts. The expectation of receiving the money in future may not come true and this may lead to financial crisis forcing the borrower to sell off the property. This is especially true in the following property markets.

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Disclaimer

Lots of approximations and assumptions have been made while developing the calculators.

Please make your own calculations before making any financial decision.