Analyze debt service coverage ratio (DSCR), monthly payments, and balloon payments for income-producing properties.
Monthly Principal & Interest
$0.00
Loan-to-Value (LTV)
0%
Debt Service Coverage Ratio (DSCR)
0.00
Net Operating Income (NOI)
$0.00
Estimated Balloon Payment
$0.00
Total Interest Paid
$0.00
Understanding Commercial Real Estate Financing
Commercial real estate (CRE) loans differ significantly from residential mortgages. While residential loans are primarily based on the borrower's personal income and credit, CRE loans focus heavily on the income generated by the property itself. This calculator helps investors and developers evaluate the viability of a commercial property purchase.
Key Metrics Explained
Loan-to-Value (LTV): The ratio of the loan amount to the purchase price. Commercial lenders typically prefer an LTV between 65% and 80%.
Debt Service Coverage Ratio (DSCR): This measures a property's ability to cover its debt payments. It is calculated by dividing the Net Operating Income (NOI) by the annual debt service. Most lenders require a DSCR of at least 1.20x to 1.25x.
Amortization vs. Term: Commercial loans often have a long amortization period (e.g., 25 years) but a much shorter actual loan term (e.g., 5 or 10 years). At the end of the term, the remaining balance is due as a "balloon payment."
Net Operating Income (NOI): Your Gross Income minus all Operating Expenses (excluding taxes and interest). This is the "cash flow" available to pay the mortgage.
Example Calculation
Suppose you are purchasing a small office building for $1,000,000. You secure a loan for $750,000 at a 6.5% interest rate with a 25-year amortization and a 10-year balloon term. Your annual rental income is $120,000, and expenses are $30,000.
In this scenario:
Your Monthly Payment would be approximately $5,064.21.
Your NOI is $90,000 ($120k – $30k).
Your DSCR is 1.48 ($90,000 / ($5,064.21 * 12)). Since 1.48 is greater than 1.25, the loan is likely to be approved.
After 10 years, you would owe a balloon payment of roughly $578,450.
Why Use a Commercial Loan Calculator?
Using a specialized calculator allows you to stress-test your investment. By adjusting interest rates or expense ratios, you can see how sensitive your cash flow is to market changes. It is an essential tool for "back-of-the-envelope" underwriting before you present a deal to potential lenders or equity partners.
function calculateCRE() {
var price = parseFloat(document.getElementById("propertyValue").value);
var loan = parseFloat(document.getElementById("loanAmount").value);
var annualRate = parseFloat(document.getElementById("interestRate").value);
var amortYears = parseFloat(document.getElementById("amortizationPeriod").value);
var termYears = parseFloat(document.getElementById("loanTerm").value);
var income = parseFloat(document.getElementById("annualIncome").value);
var expenses = parseFloat(document.getElementById("annualExpenses").value);
if (isNaN(price) || isNaN(loan) || isNaN(annualRate) || isNaN(amortYears) || loan 0 ? (noi / annualDebtService) : 0;
// Balloon Payment Calculation (Future Value of the loan)
var balloon = 0;
if (termYears < amortYears) {
var fvFactor = Math.pow(1 + monthlyRate, termMonths);
balloon = (loan * fvFactor) – (monthlyPayment * (fvFactor – 1) / monthlyRate);
} else {
balloon = 0;
}
// Total Interest over the Loan Term
var totalInterest = (monthlyPayment * Math.min(termMonths, totalMonths)) – (loan – (termYears < amortYears ? balloon : 0));
// Display Results
document.getElementById("creResults").style.display = "block";
document.getElementById("resMonthlyPayment").innerText = "$" + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resLTV").innerText = ltv.toFixed(2) + "%";
document.getElementById("resDSCR").innerText = dscr.toFixed(2);
document.getElementById("resNOI").innerText = "$" + noi.toLocaleString();
document.getElementById("resBalloon").innerText = "$" + Math.max(0, balloon).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resTotalInterest").innerText = "$" + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Smooth scroll to results
document.getElementById("creResults").scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}