CHAPTER 35Calculation 29: Principal Balance/Balloon Payment

What It Means

When you have a mortgage that is amortized over a particular number of level payments, each of those payments reduces the outstanding balance of the loan. There are a number of reasons beyond mere curiosity why you might want to know the balance at a given point in the loan. You may be getting ready to sell or refinance the property, for example, and in either case, you’ll have to pay off that balance.

Another occasion will occur when your loan calls for what is known as a “balloon payment.” It is not uncommon for a commercial lender to structure a mortgage so that your monthly payment is based on a term of 15 years or more, but where the full balance comes due much earlier, ...

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