Commercial real estate amortization is the gradual elimination of a mortgage. This is done through regular mortgage payments over a specified period of time. These payments must be sufficient to cover both principal and interest.
An amortization schedule is a table that provides a breakdown of the schedule of payments from the loan’s first required payment to the loan’s final payment. It details the amount of principal and the amount of interest paid each month.
For commercial real estate, a typical loan structure is a 10-year term, with a 25-year amortization. This means at the end of 10 years, there will be a for the original loan balance. A typical loan structure for a residential mortgage is a 30-year term, with a 30-year amortization. In this case there would be no balloon payment at the end of the loan.