Commercial Real Estate (CRE) loans differ significantly from residential mortgages. While a home loan is typically amortized and termed for 30 years, commercial loans often feature shorter terms with "balloon payments." This calculator helps investors and business owners estimate their monthly debt service and the final payoff amount required at the end of the term.
Amortization vs. Loan Term
In the commercial world, the amortization period determines the monthly payment amount (e.g., a 25-year schedule), but the loan term is when the debt actually matures (e.g., 5, 7, or 10 years). If the term is shorter than the amortization period, the remaining balance must be paid in full as a balloon payment or refinanced.
Example Calculation
If you take out a $1,000,000 loan at a 6.5% interest rate with a 25-year amortization and a 10-year term:
Your monthly payment would be approximately $6,752.
Over the 10-year term, you would pay $583,639 in interest.
At the end of year 10, you would owe a balloon payment of roughly $773,391.
Key Factors for Approval
Lenders look at more than just credit scores for CRE loans. Key metrics include:
LTV (Loan-to-Value): Usually capped at 75-80% for commercial properties.
DSCR (Debt Service Coverage Ratio): Most lenders require a DSCR of 1.20x to 1.35x, meaning the property's net operating income must be at least 20-35% higher than the annual debt payments.
function calculateCRELoan() {
var loanAmount = parseFloat(document.getElementById('cre_loan_amount').value);
var annualRate = parseFloat(document.getElementById('cre_interest_rate').value);
var amortYears = parseFloat(document.getElementById('cre_amortization').value);
var termYears = parseFloat(document.getElementById('cre_loan_term').value);
if (isNaN(loanAmount) || isNaN(annualRate) || isNaN(amortYears) || isNaN(termYears) || loanAmount = amortization, balloon is zero
if (termYears >= amortYears) {
balloonPayment = 0;
termMonths = totalAmortMonths;
}
var totalInterest = (monthlyPayment * termMonths) – (loanAmount – balloonPayment);
var totalCost = (monthlyPayment * termMonths) + balloonPayment;
document.getElementById('res_monthly_pay').innerHTML = '$' + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_total_interest').innerHTML = '$' + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_balloon').innerHTML = '$' + balloonPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_total_cost').innerHTML = '$' + totalCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res_term_year').innerHTML = termYears;
document.getElementById('cre_results_box').style.display = 'block';
}