How to Calculate Effective Interest Rate on Financial Calculator

Commercial Real Estate Loan Calculator

Analyze DSCR, LTV, and Balloon Payments for Income-Producing Properties

Loan Parameters

Results Overview

Monthly Principal & Interest
$5,063.30
Loan Amount
$750,000.00
LTV Ratio
75.00%
DSCR (Debt Coverage)
1.97
Balloon Payment
$602,455.12
TOTAL DEBT SERVICE (ANNUAL)
$60,759.60

Understanding Commercial Real Estate Loans

Commercial real estate (CRE) financing differs significantly from residential mortgages. While residential loans focus on the borrower's personal income, commercial lenders prioritize the income-generating potential of the property itself. This calculator helps you determine if a commercial asset is financially viable and bankable.

Key Commercial Metrics Explained

  • DSCR (Debt Service Coverage Ratio): This is the most critical metric for lenders. It measures the property's ability to cover its debt. A DSCR of 1.25 means the property earns 25% more than the annual mortgage payments. Most lenders require a minimum DSCR of 1.20 to 1.35.
  • LTV (Loan-to-Value): The ratio of the loan amount to the purchase price. In commercial real estate, LTVs typically range from 65% to 80%, requiring higher down payments than residential properties.
  • Amortization vs. Term: Commercial loans often have a 25-year amortization period (to keep payments low) but a much shorter "term" (e.g., 5, 7, or 10 years). At the end of the term, the remaining balance—the Balloon Payment—must be paid off or refinanced.

Practical Scenario: Medical Office Building

Imagine you are purchasing a medical office building for $2,500,000. You put 30% down ($750,000), leaving a loan of $1,750,000. At a 6% interest rate over a 25-year amortization and a 10-year term, your monthly payment would be roughly $11,275. If the property generates a Net Operating Income (NOI) of $220,000 annually, your DSCR would be 1.63, making it a very strong candidate for bank financing.

Why Net Operating Income (NOI) Matters

NOI is the "Engine" of commercial real estate. It is calculated by taking the Gross Rental Income and subtracting all Operating Expenses (taxes, insurance, maintenance, utilities, management). Crucially, NOI does not include the mortgage payment. Lenders use NOI to determine how much debt the property can safely handle.

function calculateCRELoan() { // Inputs var price = parseFloat(document.getElementById("cre_price").value); var downPercent = parseFloat(document.getElementById("cre_down_percent").value); var annualRate = parseFloat(document.getElementById("cre_interest").value); var amortYears = parseFloat(document.getElementById("cre_amort").value); var termYears = parseFloat(document.getElementById("cre_term").value); var annualNOI = parseFloat(document.getElementById("cre_noi").value); // Validate if (isNaN(price) || isNaN(downPercent) || isNaN(annualRate) || isNaN(amortYears) || isNaN(termYears) || isNaN(annualNOI)) { alert("Please enter valid numeric values in all fields."); return; } // Calculations var loanAmount = price * (1 – (downPercent / 100)); var monthlyRate = (annualRate / 100) / 12; var totalAmortMonths = amortYears * 12; var termMonths = termYears * 12; // Monthly Payment (P&I) formula: P [ i(1 + i)^n ] / [ (1 + i)^n – 1] var monthlyPayment = 0; if (monthlyRate === 0) { monthlyPayment = loanAmount / totalAmortMonths; } else { monthlyPayment = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, totalAmortMonths)) / (Math.pow(1 + monthlyRate, totalAmortMonths) – 1); } var annualDebtService = monthlyPayment * 12; var dscr = annualNOI / annualDebtService; var ltv = (loanAmount / price) * 100; // Balloon Payment Formula: FV = P(1+r)^n – (PMT/r)((1+r)^n – 1) var balloonPayment = 0; if (termYears 0 ? fmt(balloonPayment) : "$0.00"; document.getElementById("res_annual_debt").innerText = fmt(annualDebtService); // Color code DSCR var dscrBox = document.getElementById("res_dscr").parentElement; if (dscr = 1.25) { dscrBox.style.background = "#f0fff4"; dscrBox.style.borderLeftColor = "#38a169"; } else { dscrBox.style.background = "#fffaf0"; dscrBox.style.borderLeftColor = "#dd6b20"; } } // Initial calculation calculateCRELoan();

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