## Mortgage payments

Normally mortgage payments are set such that after the loan payments have been made there is no balance on the loan. However, if the payments are not sufficient to pay off the loan completely, a balloon payment is left at the end of the loan.

We can solve for the balloon payment using a financial calculator:

N=360

I=5.25/12 - the monthly rate

PV=-240000, the amount borrowed

PMT=975, the monthly payment

FV=???

The balloon payment will be $305,385.86. It is greater than the amount borrowed because the interest each month,$1050, is greater than the monthly payment.