Finance category
Mortgage, loan, investing, tax, and money calculators.
Balloon Refi Risk Calculator
Balloon loans can fail to refinance. This calculator quantifies probability-weighted exposure at maturity.
Expected shortfall
$1,000,000
Base case gap
$500,000
Downside gap
$2,500,000
How the math works
Expected shortfall = base gap × (1 − p) + downside gap × p. Probability-weighted exposure.
Most sponsors underprice tail risk. A 25% downside probability combined with a $2M gap = $500k real expected cash need. Size reserves or contingent equity calls against expected shortfall, not base case.
How to Use
- Enter balloon balance.
- Enter base case refi proceeds.
- Enter downside scenario proceeds.
- Enter probability of downside.
- Read expected shortfall.
Frequently Asked Questions
Why probability-weight?
Binary refi/no-refi views are misleading. Most deals fall between full takeout and foreclosure — partial proceeds, temporary extensions, cash-in refi. Weighted exposure captures realistic outcomes.
Downside drivers?
Rate shocks, cap rate expansion, tenant loss, lender retrenchment from asset class. Weight probability by distance to maturity — 24+ months out means more scenarios; 6 months means near-certain path.
Mitigation?
Cash reserves 10-15% of balloon. Multiple lender relationships. Rate cap if floating. Sell-ready disposition package. Extension option at current rate. Sponsor guarantee if coverage is tight.
How often should I rerun this?
Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.
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