Amortization For Commercial Loans

Amortization (also shortened to "am") is the period of time over which principal and interest payments are scheduled for payment (usually in years).

For example, a loan with a 10 year term and a 25 year am. will have a balloon payment at the end of 10 years, with calculated payments based on 25 years.

Also, the maximum number of periodic installments (expressed in years) over which repayment of a mortgage debt is calculated. A portion of each payment consists of a blend of interest and principal.

EXAMPLE

Let's assume you have a loan for $1,000,000 at a 10% interest rate with 25 year amortization and a balloon payment due in 10 years. This is what you would have:

• Present Value: $1,000,000
• Interest Rate: 10%
• Term: 25 years
• Payment: $9,087.01
• Balloon Amount: $845,613.64
• Interest Amount: $936,054.54
• Total Amount: $1,936,054.54

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