A commercial real estate loan runs on two separate clocks. The first is the term — also called the maturity — which is how long the loan actually lasts before the full balance is due. The second is the amortization period, the longer schedule the lender uses to calculate your monthly payment. A typical structure is written as “5/30” or “7/30”: a 5- or 7-year term on a 30-year amortization.
Payments are sized on the long amortization (keeps them affordable); the loan matures on the short term (keeps the lender's exposure near-term). The gap between the two is the balloon.
Why a 5/30 produces a balloon
In the early years of an amortizing loan, most of each payment is interest and only a thin slice pays down principal. After five years of a 30-year schedule, the borrower has retired only a small fraction of the balance. Everything still owed at the term's end comes due as a single lump sum. On the calculator's default ($1.4M loan, 5-year term, 30-year amortization), the majority of the original balance is still outstanding at maturity — that remaining balance is the balloon you must refinance or repay.
Where interest-only periods fit
Many commercial loans — particularly bridge and value-add financing — start with an interest-only (IO) period. During IO you pay only interest and no principal, which lowers the payment and preserves cash flow while a property is being stabilized, leased up, or renovated. The trade-off is that no equity is built through amortization during those months, so the balloon at maturity is larger. Lenders typically size the loan on the fully-amortizing payment even when they grant IO, which is why this tool shows both the IO and the amortizing DSCR side by side.
What refinancing at maturity looks like
When the term ends, the balloon is refinanced into a new loan, the property is sold, or the balance is repaid from other capital. Whether a refinance pencils depends on where rates, values, and credit conditions sit at maturity — not where they were at origination. A meaningful volume of commercial and multifamily debt is scheduled to mature over the 2026–2027 window, which makes planning the exit well ahead of maturity, and stress-testing it at conservative assumptions, the most useful thing a borrower with a balloon can do. We can't predict where rates land; we can help you structure for the maturity before it arrives.