function calculateCRELoan() {
var loanAmount = parseFloat(document.getElementById('creLoanAmount').value);
var annualRate = parseFloat(document.getElementById('creInterestRate').value);
var amortYears = parseFloat(document.getElementById('creAmortization').value);
var termYears = parseFloat(document.getElementById('creLoanTerm').value);
var feePercent = parseFloat(document.getElementById('creOriginationFee').value);
var propValue = parseFloat(document.getElementById('crePropertyValue').value);
if (isNaN(loanAmount) || isNaN(annualRate) || isNaN(amortYears) || isNaN(termYears)) {
alert("Please enter valid numerical values.");
return;
}
var monthlyRate = (annualRate / 100) / 12;
var amortMonths = amortYears * 12;
var termMonths = termYears * 12;
// Monthly Payment Formula: P = [r*PV*(1+r)^n] / [(1+r)^n – 1]
var monthlyPayment = 0;
if (monthlyRate === 0) {
monthlyPayment = loanAmount / amortMonths;
} else {
monthlyPayment = (monthlyRate * loanAmount * Math.pow(1 + monthlyRate, amortMonths)) / (Math.pow(1 + monthlyRate, amortMonths) – 1);
}
// Balloon Payment Formula: B = L * [(1+r)^n – (1+r)^p] / [(1+r)^n – 1]
// where n = total amort periods, p = periods elapsed
var balloonPayment = 0;
if (termYears < amortYears) {
balloonPayment = loanAmount * (Math.pow(1 + monthlyRate, amortMonths) – Math.pow(1 + monthlyRate, termMonths)) / (Math.pow(1 + monthlyRate, amortMonths) – 1);
} else {
balloonPayment = 0;
}
var upfrontFees = loanAmount * (feePercent / 100);
var ltv = (loanAmount / propValue) * 100;
var totalInterest = (monthlyPayment * termMonths) + balloonPayment – loanAmount;
document.getElementById('resMonthlyPayment').innerText = '$' + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resUpfrontFees').innerText = '$' + upfrontFees.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resLTV').innerText = ltv.toFixed(2) + '%';
document.getElementById('resTotalInterest').innerText = '$' + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resBalloonPayment').innerText = '$' + balloonPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('creResults').style.display = 'block';
}
Understanding Commercial Real Estate Loans
Commercial Real Estate (CRE) loans differ significantly from standard residential mortgages. While residential loans are typically 15 or 30-year fully amortizing products, commercial loans are often structured with balloon payments. This means the loan is calculated over a long period (amortization), but the full balance becomes due much earlier (the term).
Key Commercial Lending Terms
Amortization vs. Term: The amortization period (e.g., 25 years) determines your monthly payment amount. The term (e.g., 5 or 10 years) determines when the remaining balance is due in full.
LTV (Loan-to-Value): Lenders typically require a higher equity stake for commercial properties. Most CRE loans fall between 65% and 75% LTV.
DSCR (Debt Service Coverage Ratio): This is a measure of the cash flow produced by the property vs. the debt payment. Lenders usually look for a DSCR of 1.25x or higher.
Origination Fees: These are upfront costs charged by the lender to process the loan, usually ranging from 0.5% to 2% of the total loan amount.
Example Calculation
If you purchase an office building for $1,500,000 and secure a loan for $1,000,000 at a 6.5% interest rate with a 25-year amortization and a 10-year term:
Your monthly payment would be approximately $6,752.05.
At the end of year 10, you would owe a balloon payment of roughly $776,303.
Your LTV would be 66.67%.
Why Use a Balloon Payment?
Balloon structures allow for lower monthly payments, which improves the property's monthly cash flow. However, it creates "refinance risk." Investors must either sell the property or secure a new loan before the term ends to pay off the balloon balance. This calculator helps you forecast that future liability so you can plan your exit strategy accordingly.