Commercial Mortgage Calculator
Estimate the monthly payment, loan-to-value, annual debt service, and balloon balance on a commercial real estate loan. Add the property's net operating income to see the DSCR and the cash-on-cash return update instantly.
Payment schedule through the term (by year)
Each year's payments split between principal and interest, and the balance that remains when the loan matures. The highlighted row is the maturity year, where any remaining balance becomes the balloon.
| Year | Principal paid | Interest paid | Ending balance |
|---|
How the commercial mortgage calculator works
A commercial mortgage is priced with the same amortization formula as any other installment loan. The loan amount is the property price minus your down payment, and the payment is solved from three numbers: that loan amount, the monthly interest rate, and the number of months in the amortization period.
where L is the loan amount (price − down payment), r is the monthly rate (annual rate ÷ 12), and n is the number of months in the amortization period — not the term.
That last distinction is what separates commercial real estate from a residential mortgage, and it is where most of the confusion lives.
Amortization period vs. loan term
On a 30-year home loan, the amortization period and the term are the same 30 years: you make the last scheduled payment and the loan is gone. Commercial mortgages routinely split those two numbers apart. The payment is calculated as if the loan will run for 20, 25, or 30 years, but the note actually matures in 5, 7, or 10. The long amortization keeps the payment small enough for the property's income to absorb; the short term keeps the lender from being locked into one interest rate for a generation.
Because the payment was sized for a longer schedule, it does not retire the debt by maturity. Whatever principal is still outstanding on that date is due in a single lump sum — the balloon. This calculator computes it in closed form: it grows the original balance forward at the monthly rate and subtracts the future value of every payment made, which gives the exact balance at the maturity month. Set the term equal to or longer than the amortization period and the balloon correctly falls to zero, because the scheduled payments have already finished the job.
Loan-to-value and the down payment
Loan-to-value is the loan divided by the property price, expressed as a percentage. It is the lender's first sizing constraint and the most direct measure of how much cushion sits underneath the debt. Commercial mortgages are commonly written between 65% and 80% LTV, so a 25% down payment landing at 75% LTV sits squarely in the ordinary range. Lowering LTV raises the equity you commit at closing and shrinks every payment that follows; raising it does the reverse. The calculator shows the down payment as a percentage and as a dollar figure at the same time, because the percentage drives the underwriting conversation while the dollar figure is what actually has to clear your account.
DSCR and annual debt service
Annual debt service is simply the monthly payment multiplied by twelve. The debt service coverage ratio divides the property's net operating income by that number. NOI is rental income minus operating expenses — taxes, insurance, management, maintenance, reserves — but before any mortgage payment, so DSCR is a clean comparison of what the building earns against what the loan costs.
A DSCR of 1.25x is the threshold cited most often in commercial underwriting, meaning the property must produce 25% more income than the debt requires. It is a convention rather than a law: stabilized multifamily is sometimes sized closer to 1.20x, and volatile asset classes such as hotels are frequently held to 1.40x or above. A ratio below 1.00x means the property's own income does not cover its own debt, and the gap has to come from somewhere else. DSCR often binds before LTV does, which is why a building can appraise well and still support a smaller loan than the LTV limit implies.
Cash-on-cash return
The last figure takes the income that survives debt service and measures it against the cash you actually put in: (NOI − annual debt service) ÷ down payment. It answers a narrower question than DSCR. Where DSCR asks whether the property can carry the loan, cash-on-cash asks what the equity earns in year one. Leverage moves it in both directions — borrowing more shrinks the denominator and lifts the return when the property's unlevered yield sits above the loan constant (annual debt service ÷ loan amount), and lowers it when the yield sits below. The constant, not the interest rate, is the comparison, because every payment retires principal as well as interest. The return turns negative only when net operating income falls short of annual debt service — a DSCR below 1.00x. This calculator reports the number without judging it; how it compares to your alternatives is a question the numbers cannot answer on their own.
Frequently asked questions
How is a commercial mortgage payment calculated?
The payment is built from the standard amortization formula, using the loan amount, the monthly rate (the annual rate divided by 12), and the number of months in the amortization period. The key difference from a home loan is that the amortization period and the loan term are two separate numbers. The payment is sized on the longer amortization schedule, but the loan comes due at the end of the shorter term, leaving a balance behind.
What DSCR do commercial lenders look for?
A minimum debt service coverage ratio of 1.25x is the most common threshold in commercial underwriting, which means the property's net operating income is 25% larger than its annual debt service. The exact figure moves with property type, market, and the individual lender: stabilized multifamily is sometimes underwritten near 1.20x, while hospitality and other volatile asset classes are often held to 1.40x or higher.
Why does a commercial mortgage have a balloon payment?
Lenders keep the amortization long so the payment stays affordable to the property's cash flow, but keep the term short so they are not committed to one interest rate for decades. The gap between the two produces a balance that is still outstanding when the loan matures. That balance is the balloon, and it is typically resolved by refinancing the property, selling it, or paying the balance in cash.
How much down payment does a commercial mortgage require?
Commercial real estate loans are usually written between 65% and 80% loan-to-value, which puts the down payment somewhere between 20% and 35% of the purchase price. Owner-occupied properties financed through government-backed programs can go higher in LTV and lower in down payment. The sizing is also constrained by DSCR, so a property with thin net operating income may require more equity than the LTV limit alone suggests.
What is the difference between cash-on-cash return and cap rate?
Cap rate divides net operating income by the property price and ignores financing entirely, so it describes the asset. Cash-on-cash return divides the income left after debt service by the cash actually invested, so it describes the position after leverage. Two buyers paying the same price for the same building share a cap rate but will have different cash-on-cash returns if they borrow on different terms.
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This calculator is for educational and informational purposes only and does not constitute financial, legal, tax, or lending advice. Estimates are based on the values you enter and standard financial formulas. Confirm all figures with a qualified professional before making decisions.