Estimate monthly payments, total interest, and balloon payments for commercial properties.
Monthly Principal & Interest:$0.00
Annual Debt Service:$0.00
Total Interest Paid over Term:$0.00
Balloon Payment (End of Year ):$0.00
Understanding Commercial Real Estate Financing
Commercial Real Estate (CRE) loans differ significantly from residential mortgages. While a home loan is typically amortized over 30 years and fully paid off at the end, commercial loans often feature a balloon payment structure.
In a standard CRE loan, the monthly payment is calculated based on a long amortization schedule (e.g., 25 years) to keep monthly cash flow manageable. However, the actual term of the loan might only be 5, 7, or 10 years. At the end of this term, the remaining balance becomes due in full—this is known as the balloon payment.
Key Metrics for Commercial Lenders
DSCR (Debt Service Coverage Ratio): Lenders use this to see if the property generates enough Net Operating Income (NOI) to cover the debt. A DSCR of 1.25x or higher is typically required.
LTV (Loan-to-Value): Most commercial lenders cap their exposure at 65% to 80% of the property's appraised value.
Amortization vs. Term: The amortization determines the payment size, while the term determines when the debt must be refinanced or paid off.
Real-World Example
Imagine you are purchasing a small office building for $1,350,000. You put down 25% ($337,500) and take a loan for $1,012,500. If your interest rate is 6% with a 25-year amortization and a 10-year balloon:
Your monthly payment would be approximately $6,524.
After 10 years of making payments, you would still owe a balloon payment of roughly $773,000.
At that point, most investors choose to refinance the property or sell it to cover the balloon.
function calculateCRELoan() {
var loanAmount = parseFloat(document.getElementById("cre_loan_amount").value);
var annualRate = parseFloat(document.getElementById("cre_interest_rate").value);
var amortYears = parseFloat(document.getElementById("cre_amortization").value);
var termYears = parseFloat(document.getElementById("cre_loan_term").value);
if (isNaN(loanAmount) || isNaN(annualRate) || isNaN(amortYears) || isNaN(termYears) || loanAmount <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
var monthlyRate = annualRate / 100 / 12;
var totalAmortMonths = amortYears * 12;
var actualTermMonths = termYears * 12;
// Monthly Payment Calculation (Standard Amortization Formula)
var monthlyPayment = 0;
if (monthlyRate === 0) {
monthlyPayment = loanAmount / totalAmortMonths;
} else {
monthlyPayment = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, totalAmortMonths)) / (Math.pow(1 + monthlyRate, totalAmortMonths) – 1);
}
// Balloon Payment Calculation
// Formula for remaining balance: B = L[(1+i)^n – (1+i)^p] / [(1+i)^n – 1]
var balloonPayment = 0;
if (actualTermMonths < totalAmortMonths) {
if (monthlyRate === 0) {
balloonPayment = loanAmount – (monthlyPayment * actualTermMonths);
} else {
var numerator = Math.pow(1 + monthlyRate, totalAmortMonths) – Math.pow(1 + monthlyRate, actualTermMonths);
var denominator = Math.pow(1 + monthlyRate, totalAmortMonths) – 1;
balloonPayment = loanAmount * (numerator / denominator);
}
} else {
balloonPayment = 0;
}
// Total Interest during the Term
var totalPaidDuringTerm = monthlyPayment * actualTermMonths;
var principalPaidDuringTerm = loanAmount – balloonPayment;
var totalInterest = totalPaidDuringTerm – principalPaidDuringTerm;
// Display Results
document.getElementById("res_monthly_payment").innerText = formatCurrency(monthlyPayment);
document.getElementById("res_annual_service").innerText = formatCurrency(monthlyPayment * 12);
document.getElementById("res_total_interest").innerText = formatCurrency(totalInterest);
document.getElementById("res_balloon_payment").innerText = formatCurrency(balloonPayment);
document.getElementById("res_balloon_yr").innerText = termYears;
document.getElementById("cre_results_box").style.display = "block";
}
function formatCurrency(num) {
return "$" + num.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}