Commercial Mortgage Calculator
Estimate monthly payments and the final balloon payment for your commercial real estate loan.
Your Loan Estimate
Monthly Payment
$0
Final Balloon Payment
$0
This is an estimate for informational purposes and does not constitute financial advice.
About the Commercial Mortgage Calculator
This calculator is designed for real estate investors and business owners to estimate payments on a commercial mortgage. Unlike residential loans, commercial mortgages often feature a shorter loan term with a longer amortization period, resulting in a large 'balloon' payment at the end. This tool helps you understand both your regular monthly costs and your final lump-sum obligation.
Formula Explained
The calculator uses two standard financial formulas:
- Monthly Payment: Calculated using the standard amortization formula, but based on the longer *Amortization Period* to determine the lower monthly principal and interest payment.
- Balloon Payment: After calculating the monthly payment, the tool simulates the loan payments over the shorter *Loan Term*. The remaining principal balance at the end of this term is the balloon payment.
How to Secure Better Loan Terms
Lenders view commercial loans as higher risk. Improve your chances of getting a great rate with these tips:
Strong DSCR
Ensure the property's Net Operating Income is at least 1.25x the annual mortgage payment (a DSCR of 1.25+).
Solid Business Plan
Present a detailed business plan showing how the property will generate stable income and cover its expenses.
Larger Down Payment
A down payment of 25-30% or more significantly reduces the lender's risk and can lead to better terms.
Excellent Credit & Experience
A strong personal credit score and a proven track record of successful real estate investments are highly valued by lenders.
Frequently Asked Questions
What is the difference between loan term and amortization period? →
The Loan Term is the length of time until the loan must be paid back in full (e.g., 5 or 10 years). The Amortization Period is the length of time over which the payments are calculated, which is often much longer (e.g., 25 or 30 years). This structure results in lower monthly payments but requires a large 'balloon' payment at the end of the loan term.
What is a balloon payment in a commercial mortgage? →
A balloon payment is the large, final lump-sum payment due at the end of a commercial loan term. Because the monthly payments are calculated over a longer amortization period, a significant portion of the principal remains at the end of the shorter loan term. This remaining balance must be paid off at once or, more commonly, refinanced.
What is a typical interest rate for a commercial mortgage? →
Commercial mortgage interest rates are typically higher than residential mortgage rates because they are considered higher risk. Rates can vary widely based on the property type, the borrower's creditworthiness, and market conditions, but they are often 1% to 3% higher than residential rates.
What is a good debt service coverage ratio (DSCR)? →
The Debt Service Coverage Ratio (DSCR) is a metric lenders use to assess a property's ability to cover its debt payments with its income. A DSCR of 1.0 means the property generates exactly enough income to cover its mortgage payments. Most lenders look for a DSCR of 1.25 or higher, which indicates a healthy cash flow cushion.
What is the difference between recourse and non-recourse loans? →
In a recourse loan, if you default, the lender can seize the property and also come after your personal assets to cover the remaining debt. In a non-recourse loan, the lender's only remedy is to seize the collateral (the property itself); they cannot pursue your personal assets. Non-recourse loans are less common and typically reserved for very strong borrowers and properties.