Commercial Real Estate Loan Calculator
Analyze CRE financing, DSCR, and Balloon Payments
Monthly Payment
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Annual Debt Service
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Debt Service Coverage Ratio (DSCR)
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Balloon Payment at Year 10
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Understanding Commercial Real Estate Financing
Commercial real estate (CRE) loans differ significantly from residential mortgages. While residential loans often have 30-year terms with full amortization, commercial loans typically feature shorter terms with "balloon" payments.
Key Commercial Loan Metrics
- Amortization Period: The timeline used to calculate the monthly payment (often 20 or 25 years).
- Loan Term: The actual duration of the loan. Most CRE loans are due in 5, 7, or 10 years, at which point the remaining balance (the balloon) must be refinanced or paid off.
- DSCR (Debt Service Coverage Ratio): Lenders use this to measure the property's ability to cover its debt. A DSCR of 1.20 means the property generates 20% more income than the debt payments. Most lenders require a DSCR between 1.20 and 1.35.
- NOI (Net Operating Income): The total income generated by the property minus all necessary operating expenses (excluding taxes and interest).
Example Calculation
If you borrow $1,000,000 at 6.5% interest on a 25-year amortization with a 10-year term:
- Your monthly payment would be approximately $6,752.05.
- If your property generates $120,000 in NOI annually, your DSCR is 1.48, which is generally considered a strong ratio for lenders.
- After 10 years of payments, you would owe a balloon payment of approximately $779,531.