Model a commercial real estate loan the way lenders quote it: an amortization period that sets the payment, a shorter term that ends in a balloon, optional interest-only years and Actual/360 interest. It also checks DSCR, LTV and debt yield and sizes the maximum loan.
Last updated:
Property & loan
$
Loan size
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$
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years
Sets the payment
years
Balloon is due at the end
years
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Underwriting check
$
Rent − vacancy − operating expenses
×
%
Enter your values to see the result.
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How to use the Commercial Mortgage Calculator
Enter the property value and the loan as an LTV percentage or a dollar amount.
Enter the rate, amortization period and loan term from the term sheet (for example 25-year amortization, 10-year term).
Add any interest-only years and choose 30/360 or Actual/360 interest.
Enter the property's NOI and the lender's minimum DSCR and maximum LTV.
Press Calculate loan to see the payment, balloon, DSCR, LTV and the largest loan the property supports.
Commercial mortgage formulas
Payment: M = P × r ÷ (1 − (1 + r)^−n), where r = annual rate ÷ 12 and n = amortization years × 12.
Balloon: the remaining balance after term × 12 payments: B = P(1 + r)^k − M × ((1 + r)^k − 1) ÷ r, with k = payments made.
Max loan by DSCR = present value of (NOI ÷ minimum DSCR ÷ 12) per month over the amortization period.
Example: a $2,000,000 building with $160,000 NOI and a 70% loan ($1,400,000) at 7%, 25-year amortization, 10-year term. The payment is $9,894.91 a month ($118,739 a year), so DSCR = 160,000 ÷ 118,739 = 1.35×, which passes a 1.25× test. The debt yield is 11.43%, and about $1,100,900 is due as a balloon at year 10.
Typical commercial loan terms by property type
Property type
Typical max LTV
Typical min DSCR
Common structure
Multifamily (5+ units)
75%–80%
1.20×–1.25×
10-year term, 30-year amortization, IO possible
Office
65%–75%
1.30×–1.35×
5–10-year term, 25-year amortization
Retail
65%–75%
1.25×–1.35×
5–10-year term, 25-year amortization
Industrial / warehouse
70%–75%
1.25×
10-year term, 25-year amortization
Hotel
55%–65%
1.40×–1.50×
Shorter terms, 20–25-year amortization
Owner-occupied (SBA 504)
Up to about 90% combined
About 1.15×–1.25×
Long fixed terms, little or no balloon
Ranges are general market guidelines, not offers; actual limits depend on the lender, the market and the borrower.
Tips for comparing term sheets
Compare the balloon, not just the payment: a longer amortization lowers the payment but leaves more to refinance.
Interest-only years improve early cash flow and DSCR but do not reduce the balance.
Ask about prepayment terms (step-down, yield maintenance or defeasance) if you might sell or refinance early.
Points and fees raise the effective rate; the calculator shows the rate including them over the loan term.
Frequently asked questions
How is a commercial mortgage different from a home mortgage?
Commercial loans usually have a term (5, 7 or 10 years) that is shorter than the amortization period (20 to 30 years). Payments are calculated as if the loan were paid over the full amortization period, so a large balloon payment is due at the end of the term, which is normally refinanced or paid from a sale.
How do I calculate the balloon payment?
Compute the monthly payment over the amortization period, then find the remaining balance after the number of payments in the term. For a $1,400,000 loan at 7% with a 25-year amortization, the payment is $9,894.91 and about $1,100,900 is still owed after 10 years.
What DSCR do commercial lenders require?
Most lenders want a debt service coverage ratio of about 1.20× to 1.35×, meaning net operating income is 20% to 35% higher than annual loan payments. Riskier property types such as hotels often need more. DSCR = NOI ÷ annual debt service.
What is Actual/360 interest?
Under Actual/360, interest accrues for the actual number of days in each month using a 360-day year, so a year's interest equals 365/360 of the stated rate. The payment is usually set as if the loan were 30/360, so less principal is repaid and the balloon is slightly higher.
What is debt yield?
Debt yield is NOI divided by the loan amount. It shows the lender's return if it had to take the property, regardless of interest rate or amortization. Many lenders look for at least 8% to 10%.
What LTV can I get on a commercial property?
Typical maximums range from about 65% to 80% depending on property type, lender and borrower strength. SBA 504 and 7(a) programs can go higher for owner-occupied buildings. The loan you get is usually the lower of the LTV limit and the DSCR limit.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.