# How much is a commercial mortgage?

Computes the monthly payment, the balloon at the end of the term, the interest, the loan-to-value ratio, and the DSCR of a commercial real estate mortgage with an amortization period longer than its term.

- Page: https://www.acalculator.org/finance/commercial-mortgage-calculator
- JSON spec: https://www.acalculator.org/finance/commercial-mortgage-calculator.json
- Version: 198752c98234

## Default answer

Example with the default inputs (Property price $1,500,000.00, Down payment 25%, Interest rate 7%, Amortization period (years) 25, Loan term (years) 10, Interest-only period (years) 0, Net operating income $140,000.00, Loan start date September 30, 2026) on the example date Wednesday, September 30, 2026: A $1,125,000.00 commercial mortgage at 7% amortized over 25 years costs $7,951.27 a month and leaves a $884,625.71 balloon after 10 years.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| price | Property price | The price or appraised value of the commercial property. |
| down | Down payment | The part of the price you pay in cash, as a percent. The loan is the rest. |
| rate | Interest rate | The fixed yearly rate. The monthly rate is this ÷ 12. |
| amort | Amortization period (years) | The number of years the payment is figured over, often 20, 25, or 30. |
| term | Loan term (years) | The years until the loan is due; whatever is still owed then is paid as a balloon. |
| io | Interest-only period (years) | Years at the start when you pay only the interest; 0 for none. |
| noi | Net operating income | The property’s yearly income after operating costs and before loan payments, for the debt service coverage ratio. |
| start | Loan start date | The day the loan starts. The first payment is one month later. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| payment | Monthly payment | The level monthly principal and interest payment, figured over the amortization period. |
| ioPayment | Interest-only payment | The monthly payment in the interest-only months, when there are any. |
| balloon | Balloon at the end of the term | The balance still owed after the last regular payment, due with it. |
| loan | Loan amount | The price minus the down payment. |
| ltv | Loan-to-value | The loan as a percent of the property price. |
| interest | Interest over the term | All the interest paid until the balloon. |
| paid | Total paid over the term | All the regular payments plus the balloon: the loan plus the interest. |
| dscr | Debt service coverage ratio | The net operating income divided by a year of the level payments. |
| due | Balloon due | The month the balloon is due, when a start date is given. |

## Method

payment = L × r ÷ (1 − (1 + r)^−A), with L = price × (1 − down), r = rate ÷ 1200, and A the amortization months; balloon = L × (1 + r)^k − payment × ((1 + r)^k − 1) ÷ r after the k level payments in the term; DSCR = NOI ÷ (12 × payment).

## Assumptions

- The rate is fixed; interest is the balance × the yearly rate ÷ 12 each month.
- Payments are made at the end of each month; after any interest-only months, the payment is figured over the whole amortization period.
- The balance left after the last regular payment of the term is paid as a balloon with it.
- Fees, reserves, and prepayment penalties are not included.
- Values are not rounded to the cent between months; only the display is rounded.

## Worked examples

1. price = $1,500,000.00, down = 25%, rate = 7%, amort = 25, term = 10, io = 0, noi = $140,000.00 gives loan = $1,125,000.00, payment = $7,951.27, balloon = $884,625.71, interest = $713,777.63, dscr = 1.467272. Source: Office of the Comptroller of the Currency, Comptroller’s Handbook, Commercial Real Estate Lending. https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/index-commercial-real-estate-lending.html.
2. price = $2,000,000.00, down = 30%, rate = 6.5%, amort = 30, term = 7, io = 2 gives loan = $1,400,000.00, ioPayment = $7,583.33, payment = $8,848.95, balloon = $1,310,553.68, interest = $623,490.82. Source: Office of the Comptroller of the Currency, Comptroller’s Handbook, Commercial Real Estate Lending. https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/index-commercial-real-estate-lending.html.
3. price = $800,000.00, down = 20%, rate = 0%, amort = 20, term = 5, noi = $60,000.00 gives loan = $640,000.00, payment = $2,666.67, balloon = $480,000.00, interest = $0.00, dscr = 1.875. Source: Office of the Comptroller of the Currency, Comptroller’s Handbook, Commercial Real Estate Lending. https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/index-commercial-real-estate-lending.html.

## FAQ

### How is a commercial mortgage payment calculated?

Like a home loan payment, but over the amortization period rather than the term: payment = L × r ÷ (1 − (1 + r)^−A), where L is the loan, r is the yearly rate ÷ 12, and A is the amortization period in months. A $1,125,000 loan at 7% amortized over 25 years costs $7,951.27 a month.

### Why is there a balloon payment?

Commercial mortgages are usually figured over 20 to 30 years but fall due after 5, 7, or 10 years. The payments cover only part of the loan by then, so the rest is due at once as a balloon. Most owners refinance or sell to pay it. In the example above, $884,625.71 is still owed after 10 years.

### What is the difference between the amortization period and the term?

The amortization period sets the size of each payment. The term is how long the loan runs before it must be repaid. When they are equal, the loan is fully repaid by its payments and there is no balloon.

### What DSCR do lenders look for?

The debt service coverage ratio is the property’s net operating income divided by a year of loan payments. Many commercial lenders look for 1.20 to 1.25 or more, so the income covers the payments with room to spare. A ratio below 1 means the income does not cover the payments.

### How does an interest-only period change the loan?

In the interest-only months you pay only the interest, L × r, so the balance does not fall. Here the level payment afterwards is still figured over the whole amortization period, which leaves a larger balloon than a loan with no interest-only months.

### Is the example rate today’s commercial mortgage rate?

No. The page shows no live rates; the default is an example. Enter the rate a lender quotes you.

## Sources

- Board of Governors of the Federal Reserve System, Commercial real estate lending (Commercial Bank Examination Manual, section 2100.1): amortization, balloon maturities, and debt service coverage. https://www.federalreserve.gov/publications/files/cbem.pdf
- Office of the Comptroller of the Currency, Comptroller’s Handbook, Commercial Real Estate Lending: debt service coverage and loan-to-value. https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/index-commercial-real-estate-lending.html
- Amortized loan payment and outstanding balance formulas: S. A. Broverman, Mathematics of Investment and Credit, chapters 3 and 5.