Commercial Mortgage Calculator
A commercial mortgage payment is set by a long amortization (often 25–30 years) but the loan matures on a shorter term, leaving a balloon balance to refinance. This calculator gives the monthly P&I payment, the interest-only option, the balloon at maturity, interest paid and the DSCR.
Use this commercial mortgage calculator to size a commercial real estate loan and stress-test the exit. Enter the loan amount, rate, amortization period and term — and optionally the property's annual net operating income — to see the payment, the balloon balance due when the term ends, the total interest and whether the income covers the debt.
Enter the loan, rate, amortization and term, then press Calculate.
How the commercial mortgage calculator works
The key to commercial lending is that two different time periods are at play. The amortization period — usually 25 or 30 years — is used to calculate the monthly payment with the standard mortgage formula, which keeps it low. But the loan term is shorter, often 5, 7 or 10 years, and when it ends the loan matures. Because the payment was based on the long schedule, only a small share of the principal has been repaid, so a large balloon balance is due at maturity. This calculator computes that balloon exactly from the amortization schedule and the term.
It also shows the two numbers lenders underwrite to. The interest-only payment is the loan times the monthly rate, useful during a lease-up or value-add phase. And if you enter the property's net operating income, the tool returns the DSCR — the ratio of that income to the annual loan payment — which most lenders want above roughly 1.20 to 1.35. Pair this with the DSCR calculator, the cap rate calculator and the balloon loan calculator for a full picture.
The commercial mortgage formulas
- L — loan amount
- r — monthly rate (annual ÷ 12)
- n — payments over the amortization (years × 12)
Plan for the balloon before you sign
The balloon is the defining feature of most commercial mortgages, and the biggest risk. Because the term is far shorter than the amortization, the majority of the loan is still outstanding at maturity — on the example above, about $937,000 of a $1,200,000 loan. The plan is almost always to refinance into a new loan at that point, but refinancing depends on conditions you cannot fully control: interest rates, the property's income, and its value. If rates have risen or the market has softened, the new loan may be smaller or more expensive, so build the balloon date into your strategy from day one.
Let the income carry the debt
Commercial lenders underwrite the property as much as the borrower, and DSCR is where that shows up. A ratio of 1.25x means the building earns 25% more than its annual loan payment, giving a cushion for vacancies and surprises. If your DSCR comes out below about 1.20, expect the lender to reduce the loan amount, ask for more equity, or decline the deal. Improving the picture usually means raising net operating income, lowering the rate, or lengthening the amortization to shrink the payment — all of which this calculator lets you test in seconds.
Owner-occupied vs investment commercial mortgages
Lenders treat a commercial property very differently depending on who uses it. An owner-occupied loan is for a business buying the premises it operates from — a shop, office or warehouse where you run your company. Because your business income repays the loan, lenders can be more generous: government-backed SBA programs, for example, can finance owner-occupied property with as little as 10% down. An investment loan is for property you lease to tenants, where the rent repays the loan. Here the lender leans on the property's own cash flow, measured by the debt-service-coverage ratio, and usually asks for a larger down payment — commonly 25% to 35% — and a healthier DSCR cushion. If you will occupy most of the space yourself, say so: it can unlock better terms and a smaller down payment than an investment purchase of the same building.
Estimate only — not a loan offer or financial advice. Commercial terms, rates and DSCR requirements vary by lender and property. Confirm all figures with your lender.
How to use it & key terms
Enter the loan amount, rate, amortization period and term, and optionally the annual NOI, then press Calculate to see the payment, balloon balance, interest and DSCR.
| Term | What it means |
|---|---|
| Amortization period | The long schedule used to size the payment, often 25–30 years. |
| Loan term | When the loan matures and the balloon is due, often 5–10 years. |
| Balloon payment | The balance still owed at maturity, to refinance or pay. |
| DSCR | Net operating income ÷ annual debt payment; lenders want ~1.20–1.35. |
| NOI | Net operating income — rent minus operating expenses. |
| Interest-only | A payment covering only interest, leaving the full balance due. |
Sources & methodology
The monthly principal-and-interest payment is calculated with the standard fixed-rate amortization formula, using the number of payments implied by the amortization period. The balloon balance is the amount still owed after the number of payments in the loan term, from the closed-form remaining-balance formula. The interest-only figure is the loan times the monthly rate. Interest paid through the term is the payments made minus the principal repaid, and DSCR is the annual net operating income divided by the annual debt service (monthly payment times twelve). Interest if held to full amortization is the total of all payments minus the loan.
Sources: Standard fixed-rate amortization, closed-form remaining-balance and debt service coverage conventions used across commercial real estate lending.
Recourse, guarantees, and prepayment: the terms behind the payment
The monthly payment is only part of what you agree to on a commercial mortgage. Two clauses in the fine print — how the lender can come after you if the loan fails, and what it costs to pay the loan off early — shape the real risk far more than the interest rate does, and both differ sharply from a residential loan. Understanding them before you sign is what separates a manageable loan from one that can reach beyond the building itself.
The first is recourse. A recourse loan lets the lender pursue your other assets, and often your personal wealth, if the property is sold in default and does not cover the balance. A non-recourse loan limits the lender to the property itself, so a shortfall is the lender's problem, not yours — which is why non-recourse loans are harder to qualify for and usually reserved for stronger borrowers and properties. In practice, many commercial loans to smaller businesses are recourse and come with a personal guarantee, meaning the owner personally backs the debt even though the borrower is a company. Signing that guarantee quietly erases much of the liability protection people assume their business entity provides.
The second is the prepayment penalty. Where a homeowner can usually overpay or refinance freely, commercial loans frequently charge to leave early, because the lender is protecting an expected stream of interest. These penalties take several forms — a declining percentage of the balance over time, or more complex structures like yield maintenance or defeasance that can make an early payoff expensive. If you might sell or refinance before the term ends, the penalty can outweigh the savings from a lower rate.
The takeaway is to read a commercial mortgage as a package, not a payment. Ask whether the loan is recourse, whether a personal guarantee is required and how far it extends, and exactly what it would cost to exit early. Those answers can matter more than a fraction of a percent on the rate, especially if your plans for the property might change. Use the payment and balloon figures above as your starting point, then let the recourse and prepayment terms tell you how much risk sits behind that number.
Frequently asked questions
How is a commercial mortgage payment calculated?
A commercial mortgage uses the same amortization formula as a home loan: the monthly payment is the loan amount times the monthly rate times (1 + monthly rate) to the power of the number of payments, divided by that same quantity minus one. The number of payments comes from the amortization period, not the loan term. For example, a $1,200,000 loan at 6.75% amortized over 25 years has a monthly principal-and-interest payment of about $8,291.
What is the difference between the loan term and the amortization period?
The amortization period is the long schedule used to size the monthly payment — commonly 25 or 30 years. The loan term is the shorter period, often 5, 7 or 10 years, after which the loan matures and the remaining balance is due. Because the term is shorter than the amortization, most commercial mortgages do not fully pay off during the term and end with a balloon payment that must be refinanced or paid.
What is a balloon payment on a commercial mortgage?
A balloon payment is the loan balance still outstanding when the term ends, because the payment was based on a longer amortization. On a $1,200,000 loan amortized over 25 years with a 10-year term, roughly $937,000 is still owed at maturity. Borrowers usually refinance into a new loan at that point, so the balloon is a refinancing risk to plan around, especially if rates rise or values fall before the term expires.
What is DSCR and why do commercial lenders care?
DSCR — debt service coverage ratio — is the property's annual net operating income divided by its annual loan payments. It shows whether the building's income comfortably covers the mortgage. Most commercial lenders want a DSCR of about 1.20 to 1.35, meaning income is 20% to 35% above the debt payment. A DSCR below 1.0 means the property does not earn enough to cover its own loan, and the deal will usually be declined or resized.
What are typical commercial mortgage terms and rates?
Commercial mortgages typically amortize over 20 to 30 years with terms of 5, 7 or 10 years, and rates vary widely by property type, leverage, borrower strength and market conditions. Bank and agency loans often fall in a mid-single-digit to high-single-digit range, while bridge loans run higher. Rates and structures change frequently, so confirm current pricing and terms with lenders rather than relying on a single figure.
What is interest-only on a commercial loan?
Interest-only means each monthly payment covers only the interest, with no principal reduction, so it is simply the loan amount times the monthly rate. It lowers the payment and improves near-term cash flow, which suits value-add or lease-up phases, but the entire balance remains due at the end. This calculator shows the interest-only payment alongside the fully amortizing payment so you can compare the two.
How much down payment do you need for a commercial mortgage?
More than a home. Conventional commercial mortgages typically require 20% to 35% down, so a loan-to-value of roughly 65% to 80%, with the exact figure depending on the property type, your finances and the strength of the income. Owner-occupied purchases through an SBA program can go much lower, often around 10% down. Riskier or specialized properties demand the most equity. A larger down payment lowers your payment and improves both approval odds and your rate.
What is a good DSCR for a commercial loan?
Most commercial lenders want a debt-service-coverage ratio of at least 1.20 to 1.25, meaning the property's net operating income is 20% to 25% more than the annual loan payment. Agency and stabilized loans often sit around 1.25, while cushioned or riskier deals may need 1.30 or higher; short-term bridge loans sometimes accept less because the plan is to improve the income quickly. Lenders treat anything below about 1.20 with caution.
Can you refinance a commercial mortgage?
Yes. Commercial mortgages are refinanced much like residential ones, usually to lower the rate, extend the term, or pull cash out of built-up equity for improvements or another purchase. The catch is timing and cost: many commercial loans carry balloon dates or prepayment penalties, so the best window is often as a balloon comes due or once the property's income has grown enough to support a larger loan. Lenders re-underwrite the property on its current income and your credit, so a strong DSCR and solid occupancy help you qualify for better terms.