This document discusses various mortgage calculations and commercial real estate finance concepts. It covers topics like present value calculations for loan balances, internal rate of return calculations for lender yield, commercial loan types like construction and permanent loans, and investment analysis ratios like debt coverage ratio, leverage, and yield analysis. Commercial mortgages have shorter terms, higher down payments, and more risk than residential mortgages.

1. Chapter 15
Mortgage
Calculations

2. Finance
Time
Risk

3. What would you rather
have?
1,000 in 5 years
or
2,000 in 10 years?

4. What would you rather
have?
Depends on the
discount rate
Years FV 10% 20%
5 1,000 620.92 401.88
10 2,000 771.09 323.01

5. Five Characteristics
payment amount & frequency
loan balance
lender’s yield (IRR)
effective borrowing cost
present value of the debt

6. Loan Balance
calculate the present value of
the remaining payments

7. Loan Balance
100,000 at 30 years at 10%
PMT 10,607
After 10 years?
20 years at 10% at 10,607
PV 90,303

8. LenderYield (IRR)
100,000 at 30 years at 10%
PMT 10,607
Points 5,000
95,000 at 30 years at 10,607
i = 10.63%

9. Chapter 16
Commercial
Mortgages

10. Commercial vs.
Residential
more risk
shorter terms
higher down LTV
non-recourse

11. Commercial Loans
Construction Loan
Permanent Loan

12. The Note
payment amount and timing
penalties for late payments
insurance
maintenance
default

13. Interest Only
pay only interest
pay principal balance at
maturity
“bullet loan”

14. Balloon Mortgage
amortize over 25-30 years
maturity 5-15 years
must be prepared to payoff
loan at maturity

15. Ratios
LTV - loan to value ratio
loan ÷ value
DCR - debt coverage ratio
NOI ÷ debt service

16. DCR
1.3 to 1.5
how much NOI is there
available to make the debt
payment?
cushion to cover

17. Chapter 18
Investment Decision
Ratios

18. Yield Analysis
How can you improve yield?
Leverage

19. Leverage
Using other people’s
money to make more
money on my money.

20. Leverage

21. Leverage

22. Leverage

24. Two Elements
Equity - owner
Debt - lender

25. Yield Analysis
Purchase Price 1,000,000
NOI 100,000
Overall Rate 10.0%
Loan 750,000
Years 30
Rate 8.0%
Payment 66,621

26. Yield Analysis
Debt 750,000 66,621 8.9%
Equity 250,000 33,379 13.4%
Total 1,000,000 100,000 10.0%
Value NOI Rate

27. ExcelYield Analysis

28. Effective Gross Income
Multiplier
Price ÷ EGI

29. Operating Expense
Ratio
Expenses ÷ EGI

30. Report Hints
Cost Approach
Neighborhood
Land Rates - C21
Building Rates
Office
Retail

31. Construction Rates
Per Square Meter
Retail - one level: 1,000 - 1,400
Retail - 2+ levels: 1,200 - 1,800
Office: 1,500 - 1,800
Source:Altaweed Appraisal

32. Source: C21 Riyadh

33. Source: C21 Riyadh