Commercial Loan Calculator
Estimate your monthly payment, total interest and loan-to-value on a commercial property loan.
What a Commercial Loan Calculator Tells You
A commercial loan calculator turns four numbers you already know — the property price, your down payment, the interest rate you have been quoted and the amortization term — into the two figures that actually decide whether a deal works: your monthly payment and the total interest you will hand the lender over the life of the loan.
Commercial property financing behaves differently from a home mortgage. Lenders underwrite the property's income rather than only your personal salary, down payments are larger, and many loans carry a balloon payment long before the amortization schedule finishes. Running the numbers before you approach a lender tells you whether the rent the building produces can comfortably cover the debt.
The Formula Behind the Calculator
The tool uses the standard amortizing loan payment formula:
M = P × [ r(1 + r)n ] / [ (1 + r)n − 1 ]
- M — the monthly payment
- P — the principal (property value minus your down payment)
- r — the monthly interest rate (annual rate divided by 12, then by 100)
- n — the total number of monthly payments (years × 12)
Worked Example
Say you are buying a small retail unit priced at $600,000, putting $150,000 down, at 6.5% over a 20-year amortization.
- Principal: $600,000 − $150,000 = $450,000
- Monthly rate: 6.5 / 100 / 12 = 0.005417
- Number of payments: 20 × 12 = 240
- Monthly payment: $3,355.08
- Total paid over 20 years: $805,219
- Total interest: $355,219 — about 79% of the amount you borrowed
That last line is the one most buyers underestimate. Over a long amortization, interest can approach or exceed the sum borrowed, which is exactly why shaving even half a percent off the rate matters so much.
Loan-to-Value (LTV) and Why Lenders Care
LTV is the loan divided by the property value. In the example above, $450,000 / $600,000 gives an LTV of 75%. Commercial lenders typically cap LTV lower than residential lenders do, because a vacant commercial unit is harder to sell than a house.
| Property type | Typical maximum LTV | Usual down payment |
|---|---|---|
| Multifamily / apartments | 75% – 80% | 20% – 25% |
| Office and retail | 65% – 75% | 25% – 35% |
| Industrial / warehouse | 65% – 75% | 25% – 35% |
| Hospitality (hotels) | 55% – 65% | 35% – 45% |
| Special purpose | 50% – 65% | 35% – 50% |
A lower LTV usually earns a better rate, because the lender is risking less relative to the collateral.
The Number the Calculator Cannot Show You: DSCR
Debt Service Coverage Ratio is the single figure most commercial underwriters lead with. It compares the property's net operating income to its annual debt payments:
DSCR = Net Operating Income / Annual Debt Service
Using the worked example, annual debt service is $3,355.08 × 12 = $40,261. If the unit produces $52,000 of net operating income, DSCR is 52,000 / 40,261 = 1.29. Most lenders want at least 1.20 to 1.25; below that, they will ask for a bigger down payment or decline. Take the monthly payment from this calculator, multiply by 12, and check it against the property's income before you get attached to a deal.
Amortization Term vs Loan Term
This trips up nearly every first-time commercial borrower. The amortization term is the schedule the payment is calculated on — often 20 or 25 years. The loan term is how long before the lender wants their money back — often only 5, 7 or 10 years.
At the end of the loan term you owe the remaining balance as a lump sum, known as a balloon payment. Use the amortization schedule in the calculator above to read the outstanding balance at the month your balloon falls due. In the worked example, after 7 years (month 84) about $352,700 would still be owed — money you must refinance or repay outright.
Common Mistakes to Avoid
- Budgeting only the mortgage payment. Property taxes, insurance, maintenance, management fees and vacancy allowance all sit on top.
- Forgetting closing costs. Appraisal, environmental reports, legal fees and origination points commonly add 2% to 5% of the loan.
- Ignoring the balloon. A payment you can afford for seven years is no help if you cannot refinance in year eight.
- Assuming a fixed rate. Many commercial loans reset after the initial period; test a higher rate in the calculator to see whether the deal still works.
- Using residential assumptions. Commercial down payments are larger and terms shorter than most homebuyers expect.
Frequently Asked Questions
How much down payment do I need for a commercial property?
Usually 20% to 35%, depending on the property type and your financials. Multifamily sits at the lower end, while hotels and special-purpose buildings sit at the higher end. Government-backed options such as SBA 504 loans can go as low as 10% for owner-occupied premises.
What is a good interest rate on a commercial loan?
Commercial rates typically run one to two percentage points above comparable residential mortgage rates, because the lender's risk is higher and the terms are shorter. Your actual rate depends on the property type, LTV, DSCR, lease strength and your credit profile.
Can I pay off a commercial loan early?
Often yes, but many commercial loans carry prepayment penalties such as a step-down schedule, yield maintenance or defeasance. Always check the prepayment clause before assuming you can refinance or sell without a cost.
Why is my commercial loan term shorter than the amortization?
Lenders limit their exposure to interest-rate movement by calling the loan in after 5 to 10 years while still calculating payments on a 20 to 25 year schedule. This keeps the monthly payment affordable but leaves a balloon balance due at the end of the term.
Does this calculator include taxes and insurance?
No. It calculates principal and interest only. Add property taxes, insurance, maintenance and any management fees separately to arrive at your true monthly cost of ownership.
What DSCR do commercial lenders require?
Most want a minimum of 1.20 to 1.25, meaning the property earns 20% to 25% more than the annual loan payment. Stronger properties with long leases to creditworthy tenants may be approved slightly lower; riskier assets are held to a higher standard.