Borrow on a $250,000 lot with 35% down, a 7.5% rate and a 15 year amortization and you pay $1,495.83 a month. And yet $126,653 is still owed when the 5 year term ends. The calculator shows the payment, that leftover balloon balance and the cash you need on day one.
What is a balloon, and why does the term matter more than the payment?
Land loans are usually short. The payment is worked out over the amortization, 15 years here, but the lender wants whatever is left back when the term stops. That last amount is the balloon. You pay it from savings, from a sale, or by refinancing into another loan or a construction mortgage.
Terms run from 1 to 10 years and amortizations from 5 to 25. Shorter repayment? You’ll pay more each month and owe a smaller balloon. A longer one keeps the payment low but pushes more debt into the final year. Try a few pairs and set the balance due against the money you expect to have, since that comparison is the whole point. The table shows how slowly the default balance falls.
| End of year | Balance owed |
|---|---|
| 1 | $156,346 |
| 2 | $149,721 |
| 3 | $142,591 |
| 4 | $134,915 |
| 5 | $126,653 |
Look at year one. You paid about $17,950 over twelve months and the balance only dropped by $6,154, because at 7.5% most of the early payments go to interest.
How much does amortization change the balloon?
Keep the same $162,500 loan and the same 5 year term, and change only the amortization. Over 10 years the payment is $1,919.20 and the balloon $96,039. Over 15 years, our default, it’s $1,495.83 and $126,653. Over 25 years the payment drops to $1,188.78, but you still owe $148,857 at the end of year five.
Picture Sam in Calgary, who wants a lot to build on in a few years. The 25 year setting keeps about $307 a month, give or take a few bucks, in his pocket against the 15 year one, which feels great, until he sees that he’d owe about $22,000 more on the balloon.
How much does a bigger down payment help?
On the default loan, 35% down is $87,500, so you borrow $162,500. Closing costs of 2% add $5,000, which puts the cash needed at purchase at $92,500. Across five years the payments include $53,903 of interest, and the balloon is $126,653.
Now move the down payment to 50% and the loan drops to $125,000. The payment falls to $1,150.64, interest over the term to $41,464 and the balloon to $97,426. But the cash needed climbs to $130,000.
So which do you find more easily, monthly cash or a lump sum? Let the answer pick the split.
What can go wrong with a land loan?
The first mistake, and it’s a common one, is planning around the monthly payment alone and never asking what happens in year five. If you can’t pay or refinance the balloon, the lender can act on the loan. The second is that people forget what it costs to make the land usable. Zoning changes, servicing, surveys and environmental checks aren’t in the result, and any of them can be big.
Lenders often ask for 25% to 50% down on raw land. Rates run above those on a house mortgage, so type in the offer you actually get, not the defaults. If a home already stands on the lot, it’s a mortgage and you should use the mortgage calculator instead.
What should I ask the lender before I borrow?
Ask whether the rate is fixed for the whole term, whether paying the balloon early costs a penalty, and whether they will renew the balance or simply want it all back. Then rerun the numbers with the real quote.
Where the numbers come from
The payment follows the Canadian mortgage method, with the rate compounded twice a year and equal monthly payments, and the balances come from that schedule. The defaults are sample values, not quotes, so don’t read them as an offer. We have no connection with any lender, the CRA or any government body, and the figures are estimates.
Buying land also triggers a transfer tax in most provinces, which the land transfer tax calculator works out. Legal and survey fees fit in the closing costs calculator, and the down payment calculator is the place to plan the cash for the build.
About this calculator
- What it does
- Estimate the payment, balloon balance and cash needed for a land loan with a term shorter than the amortization.
- Category
- Real Estate
- Last checked
- September 30, 2026
- Result type
- Estimate for information only, not tax advice.
Frequently asked questions
How big a down payment does a land loan take?
Lenders often ask for 25% to 50% on raw land. The default is 35%, and the calculator shows the cash at each level.
What's owed at the end of the term?
Whatever the payments haven't repaid. On the default loan that's $126,653 after 5 years.
Why is the rate higher than on a home?
Land loans often carry higher rates than home mortgages. Enter the rate from your own quote.
Are building costs included?
No. Zoning, servicing, surveys and environmental costs are left out, so budget for them separately.
Can the term run longer than the amortization?
No. The calculator caps the term at the amortization period, since the loan would be repaid by then.
Sources and updates
Updated: . How we check rates · Editorial team · Updates