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Commercial Mortgage Calculator with Latest Interest Rates
Our commercial mortgage calculator determines your monthly payments on your loan along with any balloon payments.
- Key Commercial Mortgage Terminology
- Loan Amount
- Interest Rate
- Amortization
- Term
- Balloon Payment Amount
- Interest-Only Payment
- Monthly P&I Payment
- Amoritization Schedule
- Current Mortgage Rates
- How to Use the Loan Calculator
- Understanding the Commercial Mortgage Calculator
- Helpful Commercial Mortgage Terms and Definitions
- Amortization
- Balloon Payment
- Collateral
- Debt Service Coverage Ratio (DSCR)
- Loan-to-Value Ratio (LTV)
- Maturity Date
- Prime Rate
- Principal and Interest (P&I)
- Refinance
- Commercial Loan Types
- Related Questions
- Get Financing
Key Commercial Mortgage Terminology
Need a quick refresher on the terms used in our calculator? Consult the list below.
Loan Amount
This is simply the total amount you are borrowing for your commercial real estate acquisition, refinance, or development. The amount of the loan you receive will vary depending on several other factors, including loan-to-value ratios and debt service coverage ratios.
Interest Rate
An interest rate is the cost of borrowing money, and it is given as a percent of the loan amount. A borrower pays this to the lender throughout the term of the loan. There is no single fixed interest rate, instead it depends on many factors, including a borrower's financial strength, the property type, the loan product, and the lender.
Amortization
Amortization is the process of reducing debt over time through regular payments. Generally, the longer the amortization period, the lower the monthly payment.
In a fully amortizing loan, the debt is fully paid once the loan matures (its term ends). In a partially amortizing loan, the amortization period is longer than the term of the loan itself. In these cases, a borrower must pay a lump-sum balloon payment at the end of the term.
Term
A loan's term is the length of time a lender provides financing for. For commercial real estate loans, terms typically range from anything as low as six months (for short-term bridge loans) to more than 40 years. Shorter-term loans typically carry higher interest rates.
Balloon Payment Amount
Balloon payments are lump-sum payments made when a loan matures. These are only required in partially amortizing loans, and they are often paid down by either refinancing or selling the property.
A balloon payment's amount varies epending on the difference between the amortization and loan term as well as the interest rate.
Interest-Only Payment
Interest-only payments are those made to cover only the costs of borrowing the money to the lender. Some short-term financing options, like bridge or construction loans, offer interest-only payments for the full term of the loan. Other loans may include an interest-only period.
Monthly P&I Payment
This is the total monthly payment due to the lender, and it includes both the borrower's contribution toward paying the principal and the interest of the loan. Longer amortizations, lower interest rates, and lower loan amounts will reduce these payments.
Amoritization Schedule
An amortization schedule is a timeline of all the payments of a loan up until the loan is completely paid off. The payments are usually the same throughout the life of the loan as long as the interest rate is fixed.
Current Mortgage Rates
The industry median interest rate for most commercial real estate loans usually falls about 3% above the effective federal funds rate. That said, different financing options have rates based on different indices. It is important to be aware of where these stand to get a good idea of what you can expect from your commercial property mortgage.
Many loans utilize the secured overnight financing rate, or SOFR, while others tie rates to the relevant Treasury yields. Others, like loans backed by the Small Business Administration, lock rates to the WSJ Prime.
Learn more about current mortgage rates ->
How to Use the Loan Calculator
Getting a commercial mortgage is serious business. The experts at Commercial Real Estate Loans understand very well that there are few shortcuts to getting your commercial real estate financing. That said, having the right tools and know-how gives you a great advantage towards securing the financing you deserve.
One of the most useful tools is our commercial mortgage calculator. This tool determines your estimated monthly payments, or debt service costs, based on the values you input: your loan amount, interest rate, amortization, and term length.
Keep in mind that the calculator only shows the principal and interest portion of your monthly payment. Some lenders may require additional fees that could be worked into the monthly payment. Take care to consider these figures when viewing your results to get a more accurate estimation of your monthly payments.
While you should also understand the financing dynamics specific to your asset type and your location through some form of commercial mortgage alert, our loan calculator can help prospective borrowers shop around for commercial properties. It can help them better understand which loans fit within their budget. It’s also an invaluable tool for refinancing an existing commercial property loan.
Understanding the Commercial Mortgage Calculator
Our calculator will use the figures you input to determine your monthly debt service costs and amortization schedule, breaking each payment down to principal and interest components. The principal is the amount of money you are borrowing from the lender.
Lenders look at many factors when determining a maximum loan amount for a borrower. These include a property's projected revenue (or net operating income) and how your asset's value compared to the loan amount (through the use of a loan-to-value ratio calculation).
The industry median interest rate for commercial real estate loans is approximately 3% above the federal rate. The amount of interest you will be required to pay for the life of the loan term is determined by the lender based on several factors, including your credit score, the property's income, and the type of asset.
Commonly associated with amortized loans are balloon payments. Balloon payments involve the borrower paying off the principal with decreasing interest amounts, leaving a large (balloon) payment of mostly principal towards the end of the loan term. Balloon payments should always be planned for, as they can deal quite a blow to your finances if not budgeted for. That's why consulting with the team at Commercial Real Estate Loans works to your advantage. Our commercial mortgage experts will ensure that your cash flow is prepared to handle balloon payments with ease throughout your loan term before you sign any contracts.
Through Commercial Real Estate Loans, you can be confident that we will provide you access to the industry’s best loan rates no matter the property type, location or size!
Helpful Commercial Mortgage Terms and Definitions
Amortization
A method of paying off a debt using a fixed repayment schedule agreed between the borrower and the lender. With amortization, payments consisting of both principal and interest (as specified in the loan agreement) are paid off over a set period of time. The structure typically involves a declining payment of interest, where more interest is paid (in comparison to principal) towards the beginning of the repayment and gradually decreases over time, allowing more principal to be paid towards the end of the loan term.
Balloon Payment
The large payment sum due towards the end of a commercial or amortized loan. Balloon payments usually occur for loans with short loan terms, and when only a portion of the principal is amortized.
Collateral
Assets or property of value introduced to the lender as assurance of worth in order to secure the loan. If a situation arises where the borrower stops making payments towards the debt (whether intentionally or due to unforeseen circumstance), the lender can seize the collateral in order to cover their loss. These claims to collateral assets by lenders are known as liens. When the loan amount is paid in full, the assets are no longer deemed as collateral. Typically, Loans secured by collateral tend to have lower interest rates.
Debt Service Coverage Ratio (DSCR)
Simply, DSCR is a way to quantify the borrower’s ability to pay back outstanding debt obligations. A borrower's "debt service" is the cash flow required to cover a standard payment of principal and interest on a debt within a payment period. The borrower's net operating income is also required to determine the debt service coverage ratio. The formula to determine DSCR is Net Operating income / Total Debt Service (DSCR Calculator). If the resulting value is greater than one, it shows the borrower is capable of repaying their debt. Conversely, a value less than one would mean an inability to cover the debt service.
Loan-to-Value Ratio (LTV)
A figure that represents the ratio of a debt in relation to the value of the collateral involved. The LTV is used by lenders in order to quantify borrower leverage, as well as determine the level of risk involved in lending the specified sum. The formula for LTV is Loan Amount / Total Value (of Collateral) (LTV Calculator).
Maturity Date
Denotes the date that the final principal payment on a loan is to be paid. The maturity date is often viewed as the "lifespan" of a loan. Once the last principal payment is met, interest payments also cease, and the debt is considered fulfilled.
Prime Rate
This standard of comparison for interest rates offered by lenders is essentially the interest rate given to a lender's most creditworthy clients. Also known as the prime lending rate, it is based on the assumption that these larger commercial borrowers have a much lower risk of defaulting on a payment.
Principal and Interest (P&I)
Payments on debts are typically broken down into two basic units. The first is known as the principal. The principal is the original sum of money borrowed from a lender, while interest is an amount derived as a percentage of the principal that acts as the borrowing cost you pay the lender.
Refinance
Refincing is the process of paying off an existing loan with a new loan. Generally this is done to secure better interest rates, lower monthly payments, or to avoid a balloon payment at the end of a loan's term. Some investors utilize refinancing as a way to get equity out of a property in what is known as a cash-out refinance.
Commercial Loan Types
There are a few different types of loans available to commercial property investors, and the rates vary depending on the type of loan. Here is a breakdown of the different types of commercial loans.
Loan Type | Term | Best For |
|---|---|---|
Conventional Loan | 5 - 25 years | Investment properties, owner-occupied properties, and properties in need of significant repairs |
Government-Backed Loan | 5 - 25 years | Owner-occupied properties, investment properties, and properties in need of significant repairs |
Portfolio Loan | 5 - 25 years | Owner-occupied properties and investment properties |
SBA 7(a) Loan | 10 - 25 years | Owner-occupied properties, investment properties, and businesses in need of working capital |
SBA 504 Loan | 10 - 20 years | Owner-occupied properties and businesses in need of long-term, fixed-rate financing |
USDA 538 Loan | 10 - 30 years | Owner-occupied properties in rural areas |
Bridge Loan | 6 - 24 months | Investment properties and properties in need of significant repairs |
Mezzanine Loan | 1 - 5 years | Properties that need additional financing beyond a first mortgage |
Construction Loan | 1 - 3 years | Properties that are being built or renovated |
USDA 538 Loan | 10 - 30 years | Owner-occupied properties in rural areas |
Life Company Loan | 5 - 25 years | Owner-occupied properties and investment properties |
Fannie Mae Loan | 5 - 25 years | Owner-occupied properties, investment properties, and properties in need of significant repairs |
Freddie Mac Loan | 5 - 25 years | Owner-occupied properties, investment properties, and properties in need of significant repairs |
CMBS Loan | 5 - 10 years | Investment properties |
HUD Multifamily Loan | 5 - 35 years | Multifamily properties with five or more units |
Fix and Flip Loan | 6 - 24 months | Properties that are being renovated and sold for a profit |
Related Questions
What is the average interest rate for a commercial real estate loan?
- The industry median interest rate for most commercial real estate loans usually falls approximately 3% above the effective federal funds rate. That said, different financing options have rates based on different indices. For example, loans backed by the Small Business Administration lock rates to the WSJ Prime, while others utilize the secured overnight financing rate, or SOFR.
What is an amortization schedule for a commercial real estate loan?
- An amortization schedule for a commercial real estate loan is a table that shows the breakdown of each monthly loan payment, including the total value of the payment, the portion of the payment that goes towards interest, and the portion of the payment that goes towards the principal. This table helps the borrower visualize how the loan matures over time, with more interest being paid at the beginning of the loan and more principal being paid towards the end of the loan.
What are the eligibility requirements for a commercial real estate loan?
- Qualifying for a commercial real estate loan is a more rigorous process than applying for a residential loan. You’ll need a detailed business plan, the plans you have for the property, 3-5 years of financial documents (business and personal), and your personal credit history. Additionally, you’ll need to provide personal details (any name changes, previous addresses), a resume, last three (or more) years’ income tax returns (personal and business), and a business plan.
What are the levels of risk associated with a commercial real estate loan?
- The levels of risk associated with a commercial real estate loan depend on the lender. Each lender has different levels of risk they’ll take on, which means each lender will offer different terms. The maturity of a permanent loan can vary from 5 - 20 years. The amortization period may be much longer than the term of the loan.