Calculate monthly payments and the final balloon payment for commercial properties.
When the remaining balance is due.
The schedule payments are based on (often longer than term).
function calculateCRELoan() {
var amount = parseFloat(document.getElementById('creLoanAmount').value);
var rateAnnual = parseFloat(document.getElementById('creInterestRate').value);
var termYears = parseInt(document.getElementById('creLoanTerm').value);
var amortYears = parseInt(document.getElementById('creAmortization').value);
var resultDiv = document.getElementById('creResult');
// Basic validation
if (isNaN(amount) || isNaN(rateAnnual) || isNaN(termYears) || isNaN(amortYears) || amount <= 0 || termYears <= 0 || amortYears <= 0) {
resultDiv.style.display = 'block';
resultDiv.innerHTML = 'Please enter valid, positive numbers for all fields.';
return;
}
// Ensure amortization is not shorter than the term for calculation purposes
var effectiveAmortYears = Math.max(termYears, amortYears);
var rateMonthly = (rateAnnual / 100) / 12;
var termMonths = termYears * 12;
var amortMonths = effectiveAmortYears * 12;
// Calculate Monthly Payment based on Amortization schedule
// Formula: M = P * [r(1+r)^n] / [(1+r)^n – 1]
var x = Math.pow(1 + rateMonthly, amortMonths);
var monthlyPayment = (amount * x * rateMonthly) / (x – 1);
// Calculate Balloon Payment (Remaining Balance after Term months)
// Formula: B = P * [(1+r)^n – (1+r)^p] / [(1+r)^n – 1] where p is months paid
var y = Math.pow(1 + rateMonthly, termMonths);
var balloonPayment = amount * (x – y) / (x – 1);
// Adjust for floating point errors if term equals amortization
if (termYears === effectiveAmortYears || balloonPayment < 0.01) {
balloonPayment = 0;
}
var totalPaymentsOverTerm = monthlyPayment * termMonths;
var totalInterest = (totalPaymentsOverTerm + balloonPayment) – amount;
var totalCost = totalPaymentsOverTerm + balloonPayment;
// Currency formatter
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
var htmlOutput = '
Loan Summary
';
htmlOutput += '
';
htmlOutput += '
Monthly Payment (P&I):
';
htmlOutput += '
' + formatter.format(monthlyPayment) + '
';
htmlOutput += '
Balloon Payment (End of Year ' + termYears + '):
';
htmlOutput += '
' + formatter.format(balloonPayment) + '
';
htmlOutput += '
Total Interest Paid:
';
htmlOutput += '
' + formatter.format(totalInterest) + '
';
htmlOutput += '
Total Cost of Loan:
';
htmlOutput += '
' + formatter.format(totalCost) + '
';
htmlOutput += '
';
if (amortYears > termYears) {
htmlOutput += 'Note: Because your amortization period (' + amortYears + ' years) is longer than your loan term (' + termYears + ' years), you have a significant balloon payment due at maturity.';
}
resultDiv.style.display = 'block';
resultDiv.innerHTML = htmlOutput;
}
Understanding Commercial Real Estate Loans and Balloon Payments
Commercial Real Estate (CRE) loans differ significantly from standard residential mortgages. They are used to purchase income-producing properties like office buildings, shopping centers, industrial warehouses, and apartment complexes. Structuring these loans requires understanding two critical concepts: the Loan Term and the Amortization Period.
Loan Term vs. Amortization Period
In residential lending, the loan term and the amortization period are usually the same (e.g., a 30-year fixed mortgage). In commercial lending, they are often different.
Amortization Period: This is the length of time used to calculate your monthly payments to ensure the loan is paid off fully by the end of the schedule. Common CRE amortization periods are 20, 25, or sometimes 30 years.
Loan Term: This is when the loan actually matures and the full remaining balance is due to the lender. Common CRE loan terms are much shorter, typically ranging from 5 to 10 years.
The Balloon Payment Explained
When the loan term is shorter than the amortization period, the monthly payments made during the term are not enough to pay off the entire principal balance. The remaining principal due at the loan's maturity date is called a balloon payment.
Borrowers typically handle a balloon payment by either refinancing the property with a new loan or selling the property to pay off the debt.
Example Scenario
Consider a commercial property investor taking out a loan with the following parameters:
Loan Amount: $1,500,000
Interest Rate: 7.0%
Loan Term: 10 Years
Amortization: 25 Years
Using the calculator above, the monthly principal and interest payment would be approximately $10,601.69. However, after paying this amount for 10 years, the loan is not fully paid off. At the end of the 10-year term, the investor would owe a substantial balloon payment of approximately $1,136,963.59.
Use the calculator on this page to determine your projected monthly cash flow requirements and the eventual balloon liability for your specific commercial investment scenario.