Commercial Mortgage Calculator

Enter the loan amount, rate, amortization period, and balloon term — plus optional property NOI — and get the monthly payment, the balloon payment due at maturity, and your debt service coverage ratio.

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How a commercial mortgage works (and why it balloons)

Commercial mortgages split two numbers that residential loans keep together: the amortization period (the schedule your payment is calculated on, typically 20–30 years) and the term (when the loan actually ends, typically 5–10 years). You make payments as if you had 25 years, but at year 10 the music stops and the entire remaining principal — the balloon — comes due at once. In practice almost nobody writes that check; they refinance or sell. The balloon exists because lenders don't want to be locked into today's rate for a quarter century on a property whose tenants, income, and market can all change.

The formula

M = P × r(1 + r)n ÷ ((1 + r)n − 1)   •   Balloon = P(1 + r)m − M × ((1 + r)m − 1) ÷ r

M is the monthly payment on loan amount P, with r the monthly rate (annual ÷ 12 ÷ 100) and n the amortization in months. The balloon is the balance still standing after m months of the term — the loan grown at interest, minus what your m payments have retired. At 0% interest the balloon is simply P minus M × m. DSCR (when you enter NOI) is annual net operating income ÷ annual debt service.

Worked example

A $1,000,000 loan at 7%, amortized over 25 years with a 10-year term: the monthly payment is $7,067.79. Over 120 payments you'll hand the lender $848,135.04 — of which $634,469.00 is interest — and still owe a balloon of $786,333.96.

If the property produces $120,000 of net operating income a year, the DSCR is 120,000 ÷ 84,813.50 ≈ 1.41 — comfortably above the 1.25 most lenders require.

DSCR: the number that actually gets your loan approved

Residential lenders underwrite you; commercial lenders underwrite the property. The debt service coverage ratio — NOI divided by annual loan payments — is their first-pass answer to "does this building pay for its own mortgage?" A DSCR of 1.25 means the property earns 25% more than the debt costs, a cushion for vacancies and surprise repairs. Below 1.25, expect a smaller loan, more equity down, or a polite no; above 1.4, you're shopping lenders rather than begging them. If your deal doesn't clear the bar, the fix is usually borrowing less, not arguing.

Expect commercial rates to run roughly 0.5–1.5 percentage points above residential, with 25–35% down payments standard — the loans aren't government-backed, the properties are harder to resell, and the lender is pricing the balloon-date uncertainty you now know how to calculate.

Frequently asked questions

Why do commercial mortgages have balloon payments?

Lenders calculate your payment on a long amortization schedule (20–30 years) but only commit to a short term (5–10 years) — they don't want today's rate locked in for decades on a property whose income and market can change. At the end of the term the remaining balance comes due as a balloon, which borrowers almost always refinance or pay off by selling.

What is DSCR and what do lenders require?

The debt service coverage ratio is the property's annual net operating income divided by annual loan payments. Most lenders want at least 1.25 — the building earning 25% more than the mortgage costs — as a cushion for vacancies and repairs. A higher DSCR gets better terms; below 1.25 usually means a smaller loan or more money down.

Are commercial mortgage rates higher than residential?

Yes, typically by 0.5 to 1.5 percentage points. Commercial loans aren't backed by government agencies the way home loans are, the collateral is harder to resell, and underwriting leans on the property's income rather than a personal paycheck. Down payments run bigger too — 25%–35% is standard.

What happens when the balloon payment comes due?

You either refinance into a new loan, sell the property, or pay the balance in cash — and nearly everyone refinances. The risk is timing: if rates have jumped or the property's income has slipped when your term expires, the new loan can be meaningfully more expensive. Smart owners start refinancing conversations 12–18 months before the balloon date.

What's the difference between amortization and loan term?

Amortization is the schedule the payment math pretends you're on — say 25 years. The term is when the loan actually ends — say 10. Payments for 10 years are calculated as if you had 25, so plenty of principal (often 75%+ of the original loan) is still unpaid when the term expires. That leftover is the balloon.

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