Mortgage Rates Difference Calculator

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Commercial Real Estate Loan Calculator

Loan Summary

Monthly Payment:

Loan-to-Value (LTV):

Total Interest Paid:

Loan Amount:

Balloon Payment:

Estimated Closing Costs:

function calculateCRE() { var price = parseFloat(document.getElementById('cre_purchase_price').value); var downPayment = parseFloat(document.getElementById('cre_down_payment').value); var annualRate = parseFloat(document.getElementById('cre_interest_rate').value) / 100; var amortYears = parseFloat(document.getElementById('cre_amortization').value); var termYears = parseFloat(document.getElementById('cre_loan_term').value); var feePercent = parseFloat(document.getElementById('cre_fees').value) / 100; if (isNaN(price) || isNaN(downPayment) || isNaN(annualRate) || isNaN(amortYears) || isNaN(termYears)) { alert("Please fill in all fields with valid numbers."); return; } var loanAmount = price – downPayment; var monthlyRate = annualRate / 12; var totalAmortMonths = amortYears * 12; var loanTermMonths = termYears * 12; // Monthly Payment Formula: P * [i(1+i)^n] / [(1+i)^n – 1] var monthlyPayment = (loanAmount * monthlyRate * Math.pow(1 + monthlyRate, totalAmortMonths)) / (Math.pow(1 + monthlyRate, totalAmortMonths) – 1); // Balloon Payment (Remaining Balance at end of term) // Formula: B = L[(1+i)^n – (1+i)^p] / [(1+i)^n – 1] var balloonBalance = loanAmount * (Math.pow(1 + monthlyRate, totalAmortMonths) – Math.pow(1 + monthlyRate, loanTermMonths)) / (Math.pow(1 + monthlyRate, totalAmortMonths) – 1); var totalInterestPaid = (monthlyPayment * loanTermMonths) – (loanAmount – balloonBalance); var ltv = (loanAmount / price) * 100; var closingCosts = loanAmount * feePercent; document.getElementById('res_monthly').innerText = '$' + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('res_ltv').innerText = ltv.toFixed(2) + '%'; document.getElementById('res_interest').innerText = '$' + totalInterestPaid.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('res_principal').innerText = '$' + loanAmount.toLocaleString(); document.getElementById('res_balloon').innerText = '$' + balloonBalance.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('res_closing').innerText = '$' + closingCosts.toLocaleString(); document.getElementById('cre_results').style.display = 'block'; }

Understanding Commercial Real Estate (CRE) Financing

Commercial real estate loans differ significantly from residential mortgages. Whether you are purchasing an office building, a retail strip, or an industrial warehouse, understanding the math behind the loan is critical for cash flow analysis and investment ROI.

Key Components of a Commercial Loan

  • Amortization vs. Loan Term: Unlike a 30-year fixed residential loan, commercial loans often have a shorter "term" (e.g., 5, 7, or 10 years) but calculate payments based on a longer "amortization" (e.g., 20 or 25 years). This leads to a Balloon Payment at the end of the term.
  • Loan-to-Value (LTV): Lenders typically require higher equity for commercial properties. While residential buyers might put down 3-5%, commercial lenders usually seek 20% to 35% down.
  • Debt Service Coverage Ratio (DSCR): Lenders use this to see if the property's income can cover the debt. A DSCR of 1.25x means the property generates 25% more net operating income than the annual debt payment.

How to Use This Calculator

  1. Purchase Price: The total cost of the commercial asset.
  2. Down Payment: The amount of cash equity you are bringing to the deal.
  3. Interest Rate: Commercial rates are typically higher than residential rates and may be fixed or variable.
  4. Amortization Period: The timeline used to calculate the monthly payment amount.
  5. Loan Term: The actual length of the loan. Most commercial loans require refinancing or a payoff via a balloon payment after this period.

Realistic Example: Small Office Building

Imagine you are purchasing a medical office for $2,000,000. You provide a 25% down payment ($500,000), leaving a loan balance of $1,500,000. The bank offers a 7% interest rate with a 25-year amortization and a 10-year term.

  • Monthly Payment: $10,601.70
  • LTV: 75%
  • Balloon Payment after 10 years: $1,189,520.45

In this scenario, after 10 years of payments, you would either need to sell the property, pay off the remaining $1.18M in cash, or refinance the loan at then-current market rates.

Why the Balloon Payment Matters

The balloon payment is the most critical factor for CRE investors to track. It represents "refinance risk." If interest rates have risen significantly by the time the loan term ends, or if the property value has decreased, the investor may find it difficult to secure a new loan to cover the balloon amount. Always ensure your exit strategy aligns with the loan term duration.

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