Commercial Mortgage Calculator
Estimate monthly payments on a commercial property loan. Enter your loan amount, interest rate, and amortization period to see your payment schedule and total interest costs.
About this calculator
Commercial mortgage payments are calculated using the standard loan amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the total number of monthly payments (amortization period in years × 12). This formula spreads principal and interest evenly across every payment so that each installment fully retires the debt by the end of the amortization period. In commercial lending, the loan term (e.g., 10 years) is often shorter than the amortization period (e.g., 25 years), meaning a balloon payment comes due at term end. Understanding the difference between term and amortization period is critical for cash-flow planning and refinance timing.
How to use
Suppose you borrow $500,000 at 6.5% annual interest, amortized over 25 years. First, compute the monthly rate: r = 6.5 / 100 / 12 = 0.005417. Next, n = 25 × 12 = 300 payments. Plug into the formula: M = 500,000 × [0.005417 × (1.005417)³⁰⁰] / [(1.005417)³⁰⁰ − 1]. (1.005417)³⁰⁰ ≈ 5.022, so M = 500,000 × (0.005417 × 5.022) / (5.022 − 1) = 500,000 × 0.02720 / 4.022 ≈ $3,379/month. Over 25 years that totals roughly $1,013,700 — about $513,700 in interest.
Frequently asked questions
What is the difference between loan term and amortization period on a commercial mortgage?
The amortization period is the full schedule over which your payments are calculated to pay off the debt completely — often 20–30 years. The loan term is how long the lender actually holds the note before it matures — commonly 5–10 years. At the end of the term, any remaining balance becomes a balloon payment that must be paid off or refinanced. Understanding both figures is essential for projecting cash flow and planning your exit strategy.
How does interest rate affect commercial mortgage monthly payments?
Interest rate has a compounding effect on monthly payments because it determines both the size of each payment and the total interest paid over the loan life. A 1% increase on a $1 million loan amortized over 25 years adds roughly $550–$600 per month. Over the full term this can mean hundreds of thousands of dollars in additional interest costs. Locking in a lower rate — or paying points up front — can dramatically improve long-term returns on investment properties.
What loan-to-value ratio do lenders typically require for commercial mortgages?
Most commercial lenders require a loan-to-value (LTV) ratio of 65%–80%, meaning you must provide a 20%–35% down payment. Higher-risk property types such as hotels or special-use buildings often face stricter LTV limits of 60%–65%. A lower LTV reduces lender risk and can unlock better interest rates. Borrowers should also be prepared for debt-service coverage ratio (DSCR) requirements, typically 1.25× or higher, ensuring the property's income covers the mortgage payment.