A loan can have manageable monthly payments and still require substantial cash at maturity. The payment schedule and the date the debt must be repaid answer different questions. Use the Commercial Loan calculator to see both, and consult the versioned methodology for its exact assumptions.
Maturity and amortization are different clocks
The amortization horizon determines how quickly regular principal-and-interest payments would pay down the loan. The contractual term, or maturity, determines when the remaining principal becomes due. In this model, a 300-month amortization horizon is 25 years; a 60-month term is five years. Payments are based on the longer horizon, but the borrower must repay the balance at month 60.
Enter durations in whole months, with the year equivalents shown beside the fields. The horizon may run from 1 to 600 months. Maturity must be at least one month and no later than that horizon. Changing one duration never silently changes another. These are calculator boundaries, not statements about available loan products.
If maturity equals the horizon and there is an amortizing phase, scheduled payments fully repay principal. If maturity comes sooner, the remaining principal is the balloon. No property-value assumption is needed to calculate it. For a separate comparison of debt and value, use LTV; for constraint-based principal sizing, use Maximum Loan Amount.
How the interest-only clock works here
The amortization horizon includes the initial interest-only months. After I months, principal amortizes over A − I months. This matches the existing Mortgage calculator timing convention. It is an explicit model assumption, not a universal commercial-loan convention. If your contract specifies a fresh amortization period after IO, translate that timing carefully before using this model.
With a $1,000,000 principal and 6% nominal annual interest, the monthly rate is 0.5%, so each IO payment is $5,000. Principal remains $1,000,000 during that phase. Six IO months within a 300-month horizon leave 294 months for amortization, and the higher regular payment starts at month seven. The schedule marks both the final IO payment and the first amortizing payment.
When I equals the contractual term T, the entire term is interest-only. No post-IO monthly payment occurs within the modeled term. The original principal is due at maturity, even when T also equals A. At zero interest, all-IO regular payments are $0 and the full principal remains due; the calculator does not divide by a zero remaining amortization period.
Payments, balloon timing and financing cost
This calculator models one fully advanced, fixed-rate US/USD loan. Principal is advanced at origination and payments occur at month-end. For an amortizing phase with N = A − I months and monthly rate r, the payment is P × r × (1 + r)^N ÷ ((1 + r)^N − 1). At zero interest it is P ÷ N.
The balloon is the principal remaining after the final regular payment. Final maturity cash is that regular payment plus the balloon. The chart and table distinguish the balance immediately before balloon repayment from the subsequent $0 balance. A maturity row is not a forecast that refinancing will succeed.
Points equal original principal times the entered points percentage. A 1% charge on $1,000,000 is $10,000. Points and fixed fees are paid upfront and are not added to principal or monthly payments. Total financing cost is interest through maturity plus those upfront fees. Principal repayment returns borrowed capital and is excluded from financing cost. Property taxes, insurance, reserves and other operating costs are outside loan payments.
Intermediate calculations stay unrounded. Monetary outputs round half-up to cents. Ratios use six decimal places in results and display to two; multiplying displayed rounded monthly payments can differ slightly from totals calculated with unrounded payments. For example, 12 × $6,443.01 is $77,316.12, while the unrounded payment produces $77,316.17 of annual regular debt service.
Mortgage constant is not the interest rate
For each applicable phase, the mortgage constant is annualized regular debt service divided by original principal. It describes the annual payment burden relative to the original loan amount. An amortizing payment includes principal, so its constant can exceed the nominal interest rate. The example below has a 6% rate and a 7.73% constant. During a positive-rate IO phase, the annualized constant equals the nominal rate in this monthly model.
This measure differs from Debt Yield, which divides annual NOI by principal and does not depend on the payment structure. Neither ratio alone establishes that a loan or investment is suitable.
Actual first-year debt service versus phase annualization
The first-year figure sums regular payments through the earlier of month 12 and maturity. A loan maturing after three months is labeled for those three months, not as a full year. If the first year contains both IO and amortizing payments, the total combines those actual payment counts.
Phase annualization answers a separate question: what is 12 times the monthly payment in this phase? It is shown even if that phase lasts less than 12 months. It must not be substituted for actual first-year payments in a mixed-phase or short-term loan.
Optional DSCR divides annual NOI by that phase’s annualized regular debt service. It excludes the balloon and upfront fees. These educational DSCR measures are not lender covenant tests: contract definitions, periods, debt scope and income adjustments can differ. Use the DSCR calculator when you want to enter a specific debt-service denominator directly.
Missing NOI is not $0 NOI. Without NOI, coverage is unavailable. A zero payment denominator also makes DSCR unavailable. When debt service is positive, zero NOI produces 0.00× coverage and negative NOI produces negative coverage; neither is hidden or converted into a positive result.
Worked example: five-year maturity, 25-year horizon
Assume $1,000,000 principal, 6% nominal annual interest, A = 300 months, T = 60 months, I = 0, 1% points, $5,000 fixed fees and $100,000 annual NOI. These are synthetic assumptions, not a current rate quote or proposed offer.
| Measure | Meaning | Result |
|---|---|---|
| Monthly payment | Regular principal and interest | $6,443.01 |
| Annual regular debt service | 12 unrounded payments | $77,316.17 |
| Balloon | After regular payment 60 | $899,320.87 |
| Final maturity cash | Final payment plus balloon | $905,763.88 |
| Interest through maturity | Interest during 60 months | $285,901.71 |
| Upfront fees | $10,000 points + $5,000 fixed | $15,000.00 |
| Total financing cost | Interest + upfront fees | $300,901.71 |
| Mortgage constant | Annual regular service ÷ principal | 7.73% |
| DSCR | Annual NOI ÷ annualized regular service | 1.29× |
The regular-payment coverage result does not address the nearly $900,000 principal balance due at maturity. Keeping those two obligations visible prevents a comfortable monthly payment from obscuring the maturity requirement.
Balloon and refinance risk
The OCC’s current Commercial Real Estate Lending handbook discusses amortization, loan structure and balloon risk, including the effect of property-value declines on refinancing. See its loan-structure and coverage discussion on printed pages 39–43. This is version 2.0, March 2022, with the March 20, 2025 removal of reputation-risk references.
The OCC’s Commercial Lending: Refinance Risk bulletin, issued October 3, 2024, describes the risk that a borrower cannot replace existing debt on reasonable terms. Higher rates, changed cash flow or reduced collateral values can make repayment harder. Meeting regular payments does not guarantee refinancing at maturity.
These sources support the concepts. Their banking supervisory guidance does not create site obligations, universal eligibility thresholds or promises of approval. The calculator’s ±0.5 and ±1 percentage-point sensitivity rows hold everything else fixed and rerun the payment model; they do not forecast a future refinancing transaction.
Reuse, sharing and model boundaries
The form starts with Workspace NOI. When shared annual operating-income inputs are available, it uses that convention, including entered reserves, and resolves NOI to cents. Otherwise no DSCR is invented; choose Manual NOI or No NOI. A manual value never overwrites rent, vacancy or expenses. Shared links and reports carry resolved optional NOI and loan inputs, so the recipient’s workspace cannot change the result.
Commercial Loan saves acquisition-role loan inputs only. Maturity edits update the contractual term and its matching balloon month together. Conflicting stored term and balloon-month values receive an unsupported-state explanation. Existing Mortgage and Rental ROI limitations on separate maturity remain; Maximum Loan still requires whole-year durations and excludes IO, and automatic DSCR reuse still cannot select an IO phase. Opening those calculators does not mutate stored commercial terms. Fees, payments and balloons are not automatically copied into other tools as calculated assumptions.
The model excludes variable rates, draw schedules, daily-interest conventions, financed fees, prepayments and penalties, lender eligibility, APR, multiple offers and refinancing forecasts. It estimates one stated loan structure for educational use. It provides no approval, investment rating, market-rate claim or guaranteed refinancing outcome.