Commercial Loan Calculator

A commercial loan calculator sizes the monthly payment over a long amortization schedule, then shows the balloon that comes due at the shorter maturity. Borrow $1,000,000 at 7% amortized over 25 years with a 10-year maturity and you pay $7,068 a month, then owe a $786,334 balloon in year 10, with $634,469 of interest paid along the way.

This page is built for property-backed loans with a balloon. For a fully amortizing loan that finances equipment, inventory or working capital, use the Business Loan Calculator; for a consumer-style balloon note without the DSCR test, the Balloon Loan Calculator; and to judge whether the property's income justifies the price in the first place, the Cap Rate Calculator or Rental Property Calculator. Use this commercial mortgage calculator when a lender has quoted an amortization term, a maturity and a rate, and you want to see the payment, the balloon and whether the property's NOI covers the debt.

How the commercial mortgage payment is calculated

Commercial real estate loans split the two terms that a home mortgage keeps together. The amortization term (commonly 20, 25 or 30 years) sets the size of the payment. The maturity or balloon term (commonly 5, 7 or 10 years) is when the lender wants the remaining balance back. The monthly payment uses the standard amortization formula applied to the long schedule:

where P is the loan amount, r is the monthly rate (annual rate ÷ 12) and n is the amortization term in months. The calculator then walks the balance forward one month at a time, charging interest on the outstanding balance and applying the rest of each payment to principal. Whatever is left at maturity is the balloon. Three more figures follow directly:

The origination fee is charged at closing, so it reduces the cash you receive rather than raising the monthly payment. The calculator reports it separately and folds it into the total cost of borrowing.

Worked example: $1,000,000 office loan, 25/10 structure

Suppose a lender offers $1,000,000 at 7.0%, amortized over 25 years, maturing in 10 years, with a 1% origination fee. The building produces $120,000 of net operating income per year.

1. Monthly rate: 7% ÷ 12 = 0.5833%. Amortization months: 25 × 12 = 300.
2. Payment: the formula gives $7,067.79 per month, or $84,813.50 of annual debt service.
3. First month split: interest is $1,000,000 × 0.5833% = $5,833.33, so only $1,234.46 goes to principal. That is why the balloon stays large.
4. Balloon at month 120: after 10 years of payments the balance is $786,333.96, or 78.6% of the original loan. Principal repaid is $213,666.04; interest paid is $634,469.00.
5. Fee and proceeds: the 1% fee is $10,000, so net proceeds are $990,000. Total cost of borrowing through maturity (interest plus fee) is $644,469.
6. Total cash out: 120 payments of $7,067.79 = $848,135.04, plus the balloon = $1,634,469.00.
7. DSCR: $120,000 ÷ $84,813.50 = 1.41x, comfortably above 1.25x. At 1.25x the same NOI would support annual debt service of $96,000 and a loan of about $1,131,895; conversely, this payment needs at least $106,016.88 of NOI to hit 1.25x.

Had the borrower asked for the loan to fully amortize over the same 10 years, the payment would jump to $11,610.85 and annual debt service to $139,330.18, pushing the DSCR down to 0.86x - a structure no lender would approve on this income. The long amortization is what makes the deal work; the balloon is the price of that lower payment.

Second example: $500,000 retail unit, 20/5 structure

A smaller deal: $500,000 at 6.5%, a 20-year amortization, a 5-year maturity, a 0.5% fee and NOI of $60,000. The payment is $3,727.87 per month ($44,734.39 per year). After 60 payments the balloon is $427,945.60, still 85.6% of the loan, because only $72,054.40 of principal has been repaid against $151,617.54 of interest. The fee is $2,500. DSCR is $60,000 ÷ $44,734.39 = 1.34x. Total cash out through maturity is $651,617.54 - the five cheap years still leave almost the whole loan to refinance.

Commercial loan payment and balloon by interest rate

Same $1,000,000 loan, 25-year amortization, 10-year maturity, $120,000 NOI. Each half-point of rate moves the payment by roughly 4.5% and shifts about $50,000 of interest over the ten years:

Note the balloon grows as the rate rises: a higher rate means more of each payment is interest, so less principal is retired before maturity. At 8.5% the DSCR slips just under 1.25x, which is exactly the kind of threshold that turns a quoted deal into a declined one.

Balloon amount by maturity term

Same $1,000,000 loan at 7% with a 25-year amortization. The payment is $7,068 in every row; only the date the balance is called changes:

The percentages hold for any loan size at 7% and 25-year amortization, so a $2,500,000 loan called after 7 years would owe roughly 86.7% of it, about $2,166,700. A five-year note repays under 9% of principal; holding the same loan to full term costs $1,120,338 in interest.

Maximum loan at a 1.25x DSCR

Lenders usually size a commercial mortgage from the property's income, not from the purchase price. Divide NOI by 1.25 to get the debt service they will allow, then convert that payment into a loan amount. With a 25-year amortization:

Every full point of rate cuts borrowing capacity by roughly 8% to 9%: $120,000 of NOI supports $1,241,655 at 6% but only $1,036,516 at 8%. The lender will also cap the loan at a maximum loan-to-value, so the actual approval is the lower of the DSCR-based figure and the LTV-based figure.

Amortization term vs. balloon: the trade-off

A shorter amortization shrinks the balloon but raises the payment and lowers DSCR. On the $1,000,000 loan at 7% with a 10-year maturity and $120,000 NOI:

• 15-year amortization: $8,988/month, balloon $453,926 (45.4%), interest $532,520, DSCR 1.11x - fails the coverage test.
• 20-year amortization: $7,753/month, balloon $667,737 (66.8%), interest $598,095, DSCR 1.29x.
• 25-year amortization: $7,068/month, balloon $786,334 (78.6%), interest $634,469, DSCR 1.41x.
• 30-year amortization: $6,653/month, balloon $858,124 (85.8%), interest $656,487, DSCR 1.50x.

Moving from 30 to 20 years costs $1,100 a month but cuts the balloon by about $190,000 and the ten-year interest by about $58,000. The right choice depends on whether cash flow today or refinancing risk in year 10 worries you more.

What is DSCR and how lenders read it

The debt service coverage ratio answers one question: does the property earn enough to pay the loan with room to spare? NOI is rental income minus operating expenses (taxes, insurance, maintenance, management, vacancy allowance) but before debt payments and income tax. Annual debt service is twelve monthly payments. A DSCR of exactly 1.00x means the property just breaks even on its mortgage; below 1.00x the owner must feed the loan from other money. Most commercial lenders look for at least 1.25x, and some property types or riskier borrowers face 1.30x to 1.50x. The calculator colors the result green at or above 1.25x, amber between 1.00x and 1.25x, and red below 1.00x, and it shows both the maximum loan the entered NOI supports and the NOI the entered loan would need.

How to use this commercial real estate loan calculator

1. Loan amount: the principal you are borrowing, after your down payment or equity. Use the quick buttons for common sizes.
2. Interest rate: the fixed note rate from your term sheet. For a floating-rate loan, enter the current all-in rate and re-run with a higher one to stress-test.
3. Amortization term: the schedule the payment is based on - 25 years is the most common for stabilized property, 20 for older buildings, 30 for multifamily.
4. Balloon / maturity term: when the loan must be repaid or refinanced. Choose Full if the loan amortizes completely, as SBA real estate loans usually do.
5. Origination fee: the lender's fee as a percentage of the loan; 0.5% to 1% is typical on bank deals. Leave it at zero if the quote is fee-free.
6. Net operating income: optional, but entering it unlocks the DSCR block and the maximum-loan figure. Use last year's actual NOI or the lender's underwritten NOI, not a pro forma best case.

Read the headline payment first, then the balloon tile, then the DSCR verdict. The rate table shows how much cushion you have if pricing moves before closing, and the maturity table shows how much of the loan you will still owe at each possible call date.

Who this calculator is for

• Investors buying office, retail, industrial or multifamily property who want to check a lender's term sheet against the building's NOI.
• Owner-occupiers financing their own warehouse, clinic or shop, deciding between a bank balloon loan and a fully amortizing SBA structure.
• Borrowers approaching maturity who need to know the exact balloon they must refinance and how a new rate changes the payment.
• Brokers and analysts sizing the maximum loan a property supports at 1.25x before requesting quotes.
• Anyone comparing structures - 20 versus 25 years of amortization, 5 versus 10 years of maturity - on the same asset.

Key commercial lending terms

• Amortization term: the notional payoff period used to size the payment, often longer than the actual loan.
• Maturity / balloon term: the date the note is due in full; the unpaid balance on that date is the balloon.
• Annual debt service: total principal and interest paid in a year (monthly payment × 12).
• NOI: net operating income, the property's income after operating expenses and before debt service, depreciation and taxes.
• DSCR: NOI divided by annual debt service; 1.25x is the coverage most lenders require.
• LTV: loan-to-value, the loan divided by the appraised value. Commercial lenders typically cap it well below residential limits.
• Origination fee: a closing charge expressed as a percentage of the loan (one point = 1%).
• Prepayment penalty: a charge for repaying early, common on commercial notes and not modeled here.
• Recourse: whether the lender can pursue the borrower personally beyond the property if the loan defaults.

What changes the result the most

• Amortization term: the biggest lever on both payment and balloon. Stretching from 20 to 30 years lowers the payment by 14% but leaves 19 percentage points more of the loan outstanding at year 10.
• Interest rate: each half-point moves the payment by about 4.5% and the ten-year interest by about $50,000 per $1,000,000 borrowed.
• Maturity: does not touch the payment at all, but decides how much you must refinance - 91% of the loan at 5 years versus 61% at 15 years on a 25-year schedule.
• NOI: every $10,000 of NOI adds roughly 0.12x of DSCR on a $84,814 debt service, and about $94,000 of borrowing capacity at 7% and 1.25x.
• Fee: a one-point fee on $1,000,000 costs $10,000 up front - equal to about 52 days of interest at 7%, so it matters more on short maturities.

Tips for a better commercial loan

• Size from NOI first. Run the DSCR block before you negotiate price; a building that only supports $1,131,895 of debt at 7% will not close at a higher loan, whatever the appraisal says.
• Match maturity to your plan. If you expect to sell in year 6, a 7-year note avoids a forced refinance; if you plan to hold, a 10-year term buys rate certainty.
• Stress-test the refinance. Re-run the balloon amount as a new loan at a rate one or two points higher and confirm the DSCR still clears 1.25x.
• Ask about prepayment terms. Yield maintenance or step-down penalties can make an early sale expensive; get the schedule in writing.
• Compare against SBA financing for owner-occupied property, where longer fully amortizing terms remove balloon risk entirely.

Limitations and assumptions

• The rate is held fixed through maturity; floating-rate notes, rate caps and resets are not modeled.
• Payments are level monthly principal and interest from day one; interest-only periods are not included - see the Interest-Only Loan Calculator for that structure.
• The origination fee is the only closing cost. Appraisal, environmental, legal, title and SBA guaranty fees are extra.
• NOI is treated as flat; real income and expenses change every year, and lenders often underwrite a vacancy factor below actual occupancy.
• The 1.25x threshold is a common market convention, not a legal rule. Your lender may require more, and LTV limits apply on top.
• Tax effects such as interest deductibility and depreciation are ignored.

How it compares to related calculators

• For a fully amortizing loan on equipment or working capital, use the Business Loan Calculator.
• For a generic balloon note without the income test, use the Balloon Loan Calculator.
• For a month-by-month schedule of the full amortization, use the Amortization Calculator.
• To value the property from its NOI, use the Cap Rate Calculator; for cash flow after debt, the Rental Property Calculator.
• For an interest-only period before amortization begins, use the Interest-Only Loan Calculator.

Sources

• U.S. Small Business Administration (SBA) - Loans: overview of SBA-backed financing.
• U.S. Small Business Administration (SBA) - 7(a) loans and 504 loans (terms for owner-occupied commercial real estate).
• Payment, balloon and DSCR figures use the standard amortization formula; no external rate data is used.