Commercial Real Estate Loan Calculator
Calculate monthly debt service, balloon payments, and Debt Service Coverage Ratio (DSCR).
Loan Amount:
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Monthly Principal & Interest:
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Total Annual Debt Service:
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Balloon Payment (at end of term):
$0.00
Net Operating Income (NOI):
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Debt Service Coverage Ratio (DSCR):
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Understanding Commercial Real Estate Loans
Commercial real estate (CRE) loans differ significantly from residential mortgages. While residential loans are typically based on an individual's creditworthiness and income, commercial loans are primarily focused on the property's ability to generate income to cover the debt.
Key Metrics in Commercial Lending
- Loan-to-Value (LTV): Most commercial lenders require a lower LTV than residential lenders, typically between 65% and 80%. This means you usually need a down payment of at least 20-35%.
- Amortization vs. Term: A unique feature of CRE loans is that the amortization period (the schedule on which the payment is calculated) is often longer than the actual loan term. For example, a loan might be calculated on a 25-year amortization but mature in just 10 years, resulting in a Balloon Payment.
- DSCR (Debt Service Coverage Ratio): This is the most critical metric for lenders. It measures the property's available cash flow to pay its current debt obligations. A DSCR of 1.25x or higher is generally required by most banks.
How to Calculate the Balloon Payment
The balloon payment is the remaining principal balance due at the end of the loan term. Since the loan term is shorter than the amortization period, the monthly payments do not fully pay off the loan. Borrowers typically refinance the balloon amount or sell the property before the term expires.
Example Calculation
If you purchase a warehouse for $1,500,000 with a 25% down payment ($375,000), your loan amount is $1,125,000. At a 6.5% interest rate with a 25-year amortization and a 10-year term, your monthly payment would be approximately $7,596. At the end of year 10, you would still owe a balloon payment of roughly $877,000.