How we calculate

Two calculators can both be correct and still disagree, because they assume different things. This page states what this site assumes, so a disagreement can be traced to a convention rather than left as a mystery.

One math core

Every figure on every tool is produced by a single shared library. No calculator carries its own copy of a payment formula. That is not tidiness for its own sake: the failure mode it prevents is two pages quoting different payments for the same loan because one of them was fixed and the other was forgotten. The library is covered by a unit test suite that runs on every change, and the at-rest figures shown when a page first loads are computed by that same library at build time — so the numbers in the shipped HTML cannot drift from the numbers the browser produces a moment later.

Payments and amortization

The periodic payment is the standard annuity formula, with the periodic rate taken as the nominal annual rate divided by the number of periods in a year. Payments are level. Amortization and term are treated as different things: the payment is solved on the amortization schedule, and where the term is shorter, the balance outstanding at the end of the term is reported as a balloon rather than quietly ignored.

A zero interest rate is a real loan, not an error. The annuity formula divides by the rate, so it is special-cased to principal divided by the number of payments rather than allowed to produce infinity.

Day count

The payment is always solved on a level 30/360 basis, which is what lenders quote. Where a tool offers a day-count choice, the convention affects how interest accrues between dates — actual/360 charges a full year's rate over 365 or 366 days, so it accrues more than 30/360 on the same balance. Where that produces a residual at the end of the schedule, the residual is reported rather than smoothed away into the final payment. All date arithmetic is done in UTC, so a schedule does not shift by a day depending on the reader's timezone.

Solving for a value that has no formula

Loan amount, payment and term can each be isolated algebraically. The interest rate cannot: it appears both as a multiplier and inside an exponent, and no rearrangement separates them. It has to be found by search.

That search is bisection over a bracket from 0% to 100%, not Newton–Raphson. Newton converges in fewer iterations when it converges, but it carries no bracket to fall back on when it overshoots, and without a convergence check it will return whatever it happens to be holding. Bisection cannot diverge: the answer is always inside the bracket and every step halves it. The cost of that guarantee is measured in microseconds, which is not a real cost.

Net operating income

NOI is effective gross income less operating expenses and replacement reserves, before debt service. Where a tool offers vacancy and reserves as optional inputs, they are genuinely optional — switched off, the deductions are zero, and the tool is doing quick arithmetic rather than pretending to underwrite. Switched on, the cascade is: vacancy comes off gross income to give effective gross income, then operating expenses and reserves come off that.

Lenders will apply both whether or not you do, so the institutional view is the honest one before signing anything. It is not the default because the first question is usually whether a deal is worth a second look at all.

Loan sizing

Where a tool sizes debt, it runs both tests a lender runs and advances the lesser: loan-to-value against the asset, and minimum debt service coverage against the income. Reporting only the loan-to-value figure overstates proceeds on any deal where income is the binding constraint, which at current rates is a great many of them.

One consequence is worth stating because it is counter-intuitive. When coverage is the binding test, the loan is cut until coverage reaches the lender's minimum — so the funded loan always reports exactly that minimum, and a tool showing only the achieved ratio would show a pass on precisely the deals that failed. Where this matters, the tools report coverage at the loan-to-value that was requested, which is the number that failed, and name the shortfall.

Rounding and precision

Nothing rounds inside the math. Rounding happens once, at display. Dollar figures are shown to whole dollars except where cents carry real information — a monthly payment, most obviously. Rates and ratios carry two decimals; interest rates carry three, because lenders price in eighths and sixteenths of a point.

One visible consequence: whole dollars do not divide by twelve. An annual figure restated monthly and back again can land a few dollars from where it started. The tools that offer that switch remember the exact amount behind the rounded display, so flipping a unit twice returns the number you typed rather than a slightly different one.

Degenerate input

No calculator here returns NaN, Infinity or a silently clamped number. Every solver returns either a result or a named reason, and the reason is rendered as a sentence. A payment below one period's interest never retires principal, so no amortization period exists — that is negative amortization, a real condition, and the tool says so rather than printing a number. A cap rate at or near zero has no finite valuation, so the grid built around it is refused rather than filled with infinities.

Answers that look wrong but are not stay visible. A loan larger than the value it is secured on produces a loan-to-value above 100% and negative equity, and both are reported. A figure quietly capped at something plausible is worse than a figure that tells you the deal does not stand up.

What is not modeled

• Taxes of any kind, including depreciation, capital gains and 1031 treatment.
• Lender-specific overlays: debt yield floors, concentration limits, recourse and sponsor covenants.
• Prepayment penalties, defeasance and yield maintenance.
• Reserves and holdbacks that reduce net proceeds at closing.
• Inflation, rent growth and any forward projection of income.

Treat any sizing figure here as the ceiling the standard tests allow, and expect a real quote to come in at or below it.

Corrections

Substantive corrections are made to the tool and noted here. If a figure disagrees with your own, the contact page explains what to send.