👋3 Ways To Calculate Interest

[Justin Goodin]

Commercial real estate lenders calculate interest on loans in three ways:

✔️ 30/360
✔️ Actual/365 (aka 365/365)
✔️ Actual/360 (aka 365/360)

Real estate underwriters should be aware of these 3 methods and understand which calculation the lender is using.

The differences can have a significant impact on the amount of interest paid over the life of the loan.

Similarly, it can also have an impact on the amount of cash flow that is available to be distributed to your investors.

[Justin Goodin]

Quote from @Melanie P.:

Quote from @Chris Seveney:

Quote from @Justin Goodin:

Commercial real estate lenders calculate interest on loans in three ways:

✔️ 30/360
✔️ Actual/365 (aka 365/365)
✔️ Actual/360 (aka 365/360)

Real estate underwriters should be aware of these 3 methods and understand which calculation the lender is using.

The differences can have a significant impact on the amount of interest paid over the life of the loan.

Similarly, it can also have an impact on the amount of cash flow that is available to be distributed to your investors.

In the example provided, which appears to come from this site, it would equate to a $340 difference on a $1M loan over 10 years or $339/year. While its still money, it is .05% which points/fees/closing costs can typically have greater fluctuations.

30/360, Actual/365, and Actual/360 - How Lenders Calculate Interest on CRE Loans – Some Important Insights - Adventures in CRE

 You wanna regurgitate some useless crap you read on the web do it in your toilet, pal. Don't come here to do it.

Take some of the information you READ here, go knock on some doors.

 Thanks for another insightful comment!