A balloon mortgage is a type of loan that requires a final lump-sum payment to be made at the end of the financing term. By comparison, fully amortized loans do not require this lump-sum balloon payment as the balance is typically paid in equal installments over a period. Balloon mortgages, however, typically have lower monthly…
Business Financing
What Is the Loan-to-Cost Ratio: Formula & How to Calculate
The loan-to-cost ratio (LTC ratio), is calculated by taking the loan amount of a commercial mortgage and dividing it by the property’s total project costs. Project costs can include things like the purchase price, renovation costs, construction costs, and other related expenses incurred as a part of completing the improvements or repairs. The LTC ratio…
Loan-to-Value (LTV) Ratio: What It Is & How To Calculate It
The loan-to-value (LTV) ratio is the amount of your loan relative to the value of the collateral it’s secured by. The LTV ratio is commonly used by lenders in determining whether to approve a loan and the specific rates and terms that will be offered. Examples of loans that commonly use an LTV ratio include…
What Is a Section 1031 Exchange, and How Does It Work?
A 1031 exchange allows an investor or business owner to sell a commercial property, acquire another, and defer capital gains taxes in the process. The name refers to section 1031 of the United States tax code. When a property is sold for cash, the net proceeds incur a capital gains tax. However, if the investor…
Free Net Operating Income (NOI) Calculator
How to Read Your NOI Calculator Results The rules of thumb for net operating income are typically: NOI should be positive on an income-producing property. NOI is typically calculated on a yearly basis. NOI does not include your monthly mortgage payments. NOI is typically used to figure out cap rate, ROI, and cash flow to…