A 25 year, $172,500 mortgage at 8.8 percent annual interest has been obtained. The plan is to own the house for four years then sell it, repaying the loan with a balloon payment. What will the balloon payment be?
Solve this problem using two steps:

Calculate the loan payment using a 25 year term.

Calculate the remaining balance after 4 years.
Step 1.
First calculate the loan payment using a 25 year term.
Set to END mode. Press
SHIFT, then
BEG/END if BEGIN in annunciator is displayed.
Keys

Display

Description

Press 12, SHIFT, then P/YR

12.00

Sets periods per year

Press 25, SHIFT, then xP/YR

300.00

Stores length of mortgage (25 X 12 = 300 months)

Press 0, then FV

0.00

Stores loan balance after 25 years

Press 172500, then PV

172,500.00

Stores annual interest rate

Press 8, [.], 8, then I/YR

8.80

Stores annual interest rate

Press PMT

1,424.06

Calculates monthly payment

Step 2
Since the payment is at the end of the month, the past payment and the balloon payment occur at the same time. The final payment is the sum of PMT and FV.
The value in PMT should always be rounded to two decimal places when calculating FV or PV to avoid small accumulative discrepancies between nonrounded numbers and actual (dollars and cents) payments. If the display is not set to two decimal places, press
SHIFT,
DISP, then
2.
Keys

Display

Description

Press SHIFT, RND, then PMT

1,424.06

Rounds payment to two decimal places, then stores

Press 48, then N

48.00

Stores 4 year term (12 x 4) that you expect to own house

Press FV

163,388.39

Calculates loan balance after 4 years

Press [+], RCL, PMT, then [=]

164,812.45

Calculates total 48th payment (PMT and FV) to pay off loan (money paid out is negative)
