Method to Pay Off a Balloon Home Equity Loan Early


Your home equity loan can have a balloon payment for its final installment. A balloon payment is when the final payment is substantially larger than all of the regular prior payments. The regular payments are small because you are only paying the interest on the loan for a period, usually between five and 10 years. After this time frame is over you have to pay the remaining balloon payment. There are certain methods and tools you can utilize to get a balloon home equity loan paid off early.

Principal Payments

Once you find out how long your interest-only term is, you can calculate how much is needed to pay each month so that the principal balance is reduced and paid off early. When you pay off your balloon home equity loan early you save yourself money in finance charges. Adding additional principal payments will help pay down the balance, which is used to calculate your finance charges, and the lower the balance each month, the lower your finance charges.


If you have the cash in the bank, you can simply pay off the balance owed. Call the bank, at some time prior to the loan's maturity date, and ask them for a payoff. The amount of the payoff will depend on how early you want to pay the loan off.


If you want to pay off your home equity balloon payment early, you can get the loan refinanced by your current lender or by another lender. The loan can now be fully amortized, which means the balance is gradually paid off because a portion of the payment goes to principal and a portion goes to interest. There are a variety of terms you can have your new loan set up for, but the most common terms are 15 and 30 years, and there will be no balloon payment due.

Mortgage Calculator

A mortgage calculator will let you know exactly how much additional money you need to pay if you want your home equity balloon payment loan paid off early. You can insert different amounts into the calculator to see how much earlier your loan can be paid off. The more money you pay in addition to the standard payment, the earlier you can pay the balloon payment balance off.


When you place your home on the market, the proceeds from the sale will pay off your home equity balloon payment loan, prior to the due date. The earlier you put your home up for sale, the earlier you can pay off the balance.

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