Commercial Real Estate Loan Payment Calculator
Switch between Equal Installment and Equal Principal repayment methods to calculate monthly debt service, interest costs, and balloon payoff amounts.
Commercial Real Estate Loan Payment & Balloon Payoff Calculator
Compare Equal Installment (fixed) vs Equal Principal (declining) loan repayment methods
Loan Summary
Fixed Monthly Debt Service: $8,778/mo
Must be refinanced or paid off at loan maturity
First Year Amortization Schedule (Equal Installment)
| Month | Start Balance | Payment | Principal | Interest | End Balance |
|---|---|---|---|---|---|
| 1 | $1,300,000 | $8,778 | $1,736 | $7,042 | $1,298,264 |
| 2 | $1,298,264 | $8,778 | $1,745 | $7,032 | $1,296,519 |
| 3 | $1,296,519 | $8,778 | $1,755 | $7,023 | $1,294,764 |
| 4 | $1,294,764 | $8,778 | $1,764 | $7,013 | $1,292,999 |
| 5 | $1,292,999 | $8,778 | $1,774 | $7,004 | $1,291,225 |
| 6 | $1,291,225 | $8,778 | $1,784 | $6,994 | $1,289,442 |
| 7 | $1,289,442 | $8,778 | $1,793 | $6,984 | $1,287,649 |
| 8 | $1,287,649 | $8,778 | $1,803 | $6,975 | $1,285,846 |
| 9 | $1,285,846 | $8,778 | $1,813 | $6,965 | $1,284,033 |
| 10 | $1,284,033 | $8,778 | $1,823 | $6,955 | $1,282,210 |
| 11 | $1,282,210 | $8,778 | $1,832 | $6,945 | $1,280,378 |
| 12 | $1,280,378 | $8,778 | $1,842 | $6,935 | $1,278,536 |
Commercial Loan Repayment Methods & Balloon Payoffs
Commercial mortgages feature shorter loan maturity terms (such as 5, 7, or 10 years) paired with longer amortization periods (such as 25 or 30 years). At maturity, the remaining principal balance must be paid off or refinanced via a balloon payment. Two primary repayment methods are available for commercial debt: 1. Equal Installment (Fixed Payment): Monthly principal & interest payment remains constant throughout the term. Interest dominates early payments, so the remaining balloon balance at maturity is higher. 2. Equal Principal (Declining Payment): A fixed portion of principal (P/n) is paid each month, while interest decreases as principal declines. Early payments are higher, but principal balance drops faster, resulting in a substantially lower balloon payment at loan maturity.
The Formulas
【Equal Installment (Fixed Monthly Payment)】
M = P × [ r(1 + r)^n ] / [ (1 + r)^n − 1 ]
【Equal Principal (Declining Monthly Payment)】
Payment at Month m (M_m) = (P / n) + [ P − (m − 1) × (P / n) ] × r
Fixed Monthly Principal = P / nReal Scenario Comparison ($1.3M Loan, 6.5% Rate, 25-Yr Amort, 10-Yr Maturity)
Suppose you obtain a $1,300,000 commercial loan at 6.5% interest on a 25-year amortization schedule with a 10-year balloon maturity:
- 10-Yr Interest Paid:$760,971
- Year 10 Balloon Payoff:$1,007,648
- Balloon % of Principal:77.5%
- Month 120 Final Payment:$8,582 / mo
- 10-Yr Interest Paid:$677,408
- Year 10 Balloon Payoff:$780,000
- Total Interest Savings:$83,563
Frequently Asked Questions
What is the main difference between Equal Installment and Equal Principal repayment?
Equal Installment provides a fixed monthly payment for predictable budgeting, but principal pays down slower. Equal Principal pays down a fixed amount of principal each month; while early payments are higher, total interest is lower and the balloon payoff at maturity is significantly smaller.
What is a balloon payment in commercial real estate?
A balloon payment is a lump-sum principal balance due at loan maturity (e.g., Year 10) when the loan term is shorter than the amortization schedule (e.g., 25 years). Investors typically refinance or sell before maturity.
What are standard amortization and maturity terms for commercial mortgages?
Most commercial mortgages use a 25-year amortization schedule to set monthly payments, paired with a 5, 7, or 10-year loan maturity term. Prime institutional assets may qualify for 30-year amortization.
How should investors choose between the two repayment methods?
Choose Equal Installment if early cash flow is tight and you prefer predictable debt service. Choose Equal Principal if NOI is strong and you want to minimize interest expenses and reduce refinancing risk at loan maturity.