Commercial Mortgage Calculator

Calculate commercial property loan payments, balloon payments, and Debt Service Coverage Ratio (DSCR). Analyze deals with different amortization periods and loan terms.

Commercial Loan Details

$
%

Typically 20-35%

%

When balloon is due

Payment calculation basis

$

For DSCR calculation

Ready to Calculate

Enter your commercial property details to see payments, balloon amount, and DSCR analysis.

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Pro Tip

Always calculate DSCR before pursuing a commercial loan. Most lenders require a minimum of 1.25x. If your property does not meet this threshold, consider a larger down payment to reduce the loan amount.

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Commercial Mortgage Basics

Commercial mortgages differ significantly from residential loans in structure, terms, and qualification criteria. They finance income-producing properties and are evaluated primarily on the property's income potential rather than the borrower's personal income alone.

The key structural difference is the gap between loan term and amortization period. A typical commercial mortgage might have a 10-year term with 25-year amortization. Monthly payments are calculated based on the 25-year schedule, but the remaining balance (balloon payment) is due at year 10, requiring refinancing.

DSCR is the primary metric lenders use to evaluate commercial loans. It measures whether the property generates sufficient income to cover debt payments. A DSCR of 1.25 means the property earns 25% more than needed for loan payments, providing a cushion for vacancies or unexpected expenses.

Interest rates on commercial mortgages are generally 0.5-2% higher than residential rates and may be fixed or adjustable. Some commercial loans feature interest-only periods, prepayment penalties, or defeasance requirements. Understanding these terms is crucial for evaluating the true cost.

Commercial Mortgage Formulas

DSCR & Balloon Payment

DSCR = NOI / Annual Debt Service
Balloon = Remaining Balance at Term End

Where:

NOI = Net Operating Income (annual)

Annual Debt Service = Monthly payment x 12

Balloon = Outstanding balance when loan term expires

Example

For a $1M property, 25% down, 7.5% rate, 10-yr term / 25-yr amort, $100K NOI:

  • • Loan: $750,000 | Monthly payment: $5,549
  • • Annual debt service: $66,588
  • • DSCR: $100,000 / $66,588 = 1.50 (exceeds 1.25 min)
  • • Balloon payment at year 10: ~$580,000
  • • Must refinance or pay balloon at maturity

Frequently Asked Questions

What is a balloon payment in commercial mortgages?
A balloon payment is the remaining loan balance due at the end of the loan term when the term is shorter than the amortization period. For example, a 10-year term with 25-year amortization means payments are calculated as if the loan runs 25 years, but the remaining balance is due in full at year 10.
What is DSCR and why does it matter?
Debt Service Coverage Ratio (DSCR) is Net Operating Income divided by Annual Debt Service (loan payments). Lenders typically require a minimum DSCR of 1.20-1.25, meaning the property generates 20-25% more income than needed to cover the loan. Higher DSCR indicates lower risk.
Why do commercial loans have shorter terms than residential?
Commercial loans typically have 5-15 year terms with 20-30 year amortization because lenders want to reassess the property and borrower periodically. At term end, the borrower refinances the balloon payment. This protects lenders against long-term market changes.
What down payment is required for commercial property?
Commercial mortgages typically require 20-35% down depending on property type, borrower strength, and loan program. SBA 504 loans can go as low as 10% for owner-occupied properties. Investment properties generally require 25% or more.
What types of properties qualify for commercial mortgages?
Commercial mortgages cover office buildings, retail centers, apartment buildings (5+ units), industrial/warehouse properties, hotels, mixed-use buildings, and other income-producing properties. Each property type has different risk profiles and lending criteria.