Amortization & balloon
See monthly payments, interest expense and the maturity balance.
Your scenario
Payments are monthly with no fees. The interest-only alternative retains the entire principal at maturity; it is not the amortizing schedule above.
How the model works
Monthly payment uses the standard level-payment amortization formula. Balloon equals outstanding principal after the scheduled term payments.
Worked illustration
A $120,000 loan at 0% interest with ten-year amortization pays $1,000 monthly. After five years, its balloon balance is $60,000.
Read term and amortization separately
Amortization determines the scheduled payment; the term determines when the remaining balance must be addressed. A five-year loan amortized over twenty-five years does not pay itself off in five years. This model makes the scheduled principal balance visible at maturity so you can evaluate the required refinancing, sale or additional equity.
Use the note’s actual payment convention for a transaction. The calculation assumes equal monthly periods, a constant annual nominal rate divided by twelve, and payments at each month-end. Daily interest, interest-only phases, future draws, rate resets, curtailments and irregular first periods require a different schedule. A lender payoff statement can include accrued interest and charges beyond principal.
Test the future takeout
Change the amortization while holding principal and rate constant. Longer amortization generally reduces scheduled payments and leaves more principal at the same maturity. Compare the cash retained during the hold with the larger takeout requirement. Neither effect alone establishes which loan produces the better investment.
Next, compare the maturity balance with conservative future proceeds from the loan-sizing and refinance tools. Use income, tenant expirations, capital condition and value appropriate to that future date. A positive current cash-on-cash return does not ensure the balloon can be refinanced. The zero-interest case still repays principal over the amortization schedule; a zero payment assumption would be incorrect.
What to check before relying on the result
No fees, rate changes, odd first periods, day-count adjustments or partial prepayments. The interest-only payment is shown separately.
Model an adverse scenario as well as the expected outcome. Change one assumption at a time to identify what drives the result, then test combinations that could occur together. A property can meet a modeled financial threshold and still fail diligence, legal requirements or lender approval.
Keep the cash-flow definitions consistent
Distinguish recurring property operations from tenant improvements, leasing commissions, capital expenditure, financing costs and entity-level distributions. Verify whether reserves are expenses, funding requirements or cash movements in the documents you are analyzing. A cash-flow convention must remain consistent across the model and the comparison.
Research context
Consult the source material for this topic. The model is an original educational calculation, not a reproduction of a lender’s underwriting system. The initial numbers are hypothetical inputs rather than current market terms. No scenario inputs are transmitted or saved by this calculator.