Commercial loan calculator for buying or refinancing property
Enter the price, your down payment, the rate, the amortization and the term to see the monthly payment, the balloon due at the end and what the loan costs along the way. The math runs in your browser, so nothing you type is sent to us.
What each input means and where to find it
A commercial loan quote or term sheet states most of these on its first page. The two lengths are the ones people mix up, so check both.
Property price
The contract price for a purchase. For a refinance, use the value the lender's appraisal puts on the property, since that is what the loan is measured against.
Down payment
The cash you put in at closing, or for a refinance the equity you leave in. Price minus the down payment is the loan amount.
Interest rate
The note rate on the term sheet. If the rate is fixed only for part of the term, enter it now and run the numbers again at a higher rate to see a reset.
Amortization period
The years the payment is calculated over. A term sheet may call it the amortization schedule or just say the loan is amortized over so many years.
Loan term
The years until the loan matures and the remaining balance is due. Look for the maturity date. If it matches the amortization, there is no balloon.
Points and fees
Origination points, each one 1% of the loan, plus lender fees paid at closing. Third-party costs like the appraisal and title are left out here.
Amortization vs loan term, and where the balloon comes from
A commercial loan can have two lengths. The amortization period decides the payment: it is how long the payments would take to pay the loan off. The term decides when the loan ends. When the term is shorter, the payments stop partway down the schedule, and whatever is still owed is due at once. That lump sum is the balloon.
Early payments are mostly interest, because interest is charged on a balance that has barely moved. That is why the balloon stays large. A $1,000,000 loan at an example rate of 7% on a 25-year amortization still owes $786,334 after ten years, about 79% of what was borrowed.
The table holds the payment steady and changes only the term. The shorter the term, the less interest you pay before it ends and the bigger the balloon. A term equal to the amortization leaves nothing at the end.
| Term | Monthly payment | Interest during the term | Balloon at the end |
|---|---|---|---|
| 5 years | $7,068 | $335,689 | $911,622 |
| 7 years | $7,068 | $460,374 | $866,680 |
| 10 years | $7,068 | $634,469 | $786,334 |
| 25 years | $7,068 | $1,120,338 | None |
How the calculator works, with LTV and DSCR
The loan amount is the price less the down payment. The monthly payment comes from the standard loan formula run over the amortization period. Each month, interest is the balance times the rate divided by 12, and the rest of the payment reduces the balance. After the last payment of the term, the balance left is the balloon.
Loan to value compares the loan with the property. A $1,250,000 building with $312,500 down needs a $937,500 loan, an LTV of 75%. The debt service coverage ratio compares the property's income with the payments. With net operating income of $100,000 a year and payments of $7,068 a month, the DSCR is 1.18. Each lender sets its own limits for both, so ask for them in the quote.
The APR with points uses the actuarial method in Appendix J of Regulation Z. It finds the rate at which the payments and the balloon repay only the money you received after points and fees.
- Loan amount
- Price − down payment
- Loan to value (LTV)
- Loan amount ÷ price or appraised value
- Monthly payment
- L × i ÷ (1 − (1 + i)^−n), i = rate ÷ 12, n = amortization in months
- Balloon
- Balance left after the term's last payment
- Annual debt service
- Monthly payment × 12
- DSCR
- Net operating income ÷ annual debt service
Buying your own building with an SBA loan
If your business will occupy the property, two SBA programs can pay for it. The SBA 504 loan is built for major fixed assets such as land and buildings. It pairs a loan from a bank with one from a Certified Development Company, plus a contribution from you. The SBA 7(a) loan is the SBA's general business loan, and buying, building or refinancing owner-occupied real estate is one of its uses. The SBA lists the current limits, down payments and terms on those pages.
Neither program finances property held as an investment and rented out to other businesses. When you have a quote from either one, enter its rate, amortization and term above to see the payment and anything due at the end. Our page on SBA and bank loans covers how we take an application to bank partners and what the file needs.
Five checks before you sign
Read the prepayment terms
A commercial loan can charge you for paying it off early, which matters if you might sell or refinance before the term ends. A step-down penalty is a percentage of the balance that gets smaller as the loan ages. Ask for the schedule in writing and work out the dollar cost in the years you might exit.
Know what yield maintenance means
Yield maintenance asks you to make the lender whole for the interest it loses when you repay early, usually measured against Treasury yields on the day you pay off. If those yields have fallen since you signed, the charge grows. Ask the lender to show you the formula with a worked example.
Find out if the rate can reset
Some loans fix the rate for the first few years and then reset it to an index plus a margin. Ask which index, how the margin is set and whether there is a cap. Then raise the rate in the calculator to see the payment you could face after the reset.
Plan for the balloon from the start
A balloon is usually paid by refinancing or selling. Whether a new loan covers it depends on rates, the property's value and its income when the term ends. A lower appraisal raises the loan to value on the new loan, and a higher rate lowers the coverage ratio.
Count the points in the cost
Points paid at closing do not show up in the rate or the payment. The APR with points spreads them over the term, so the same points cost more per year on a short term than on a long one.
Questions about commercial loan payments
Commercial loan calculator
Use the standard loan payment formula with the amortization period, not the term: payment = L × i ÷ (1 − (1 + i)^−n), where L is the loan amount, i is the annual rate divided by 12 and n is the amortization in months. A $1,000,000 loan at an example rate of 7% amortized over 25 years comes to about $7,068 a month. That payment is the same whether the term is 5, 10 or 25 years.
It is the balance still owed when the term ends before the amortization does. The monthly payments were sized to clear the loan over the longer period, so part of the loan is left and comes due in one sum. On a $1,000,000 loan at an example rate of 7% with a 25-year amortization and a 10-year term, about $786,334 is still owed after 120 payments.
The amortization period sets the size of the payment: it is the number of years the payments would take to pay the loan off in full. The term sets when the loan ends and anything still owed is due. When the two are the same, the loan pays off completely with no balloon.
Loan to value is the loan amount divided by the property's price or appraised value. A $1,250,000 building bought with $312,500 down needs a $937,500 loan, which is 75% of the price. When a lender measures the loan against an appraisal that comes in below the price, the LTV rises.
The debt service coverage ratio is the property's net operating income for a year divided by the year's loan payments. A property earning $100,000 a year after operating costs, with payments of $7,068 a month ($84,814 a year), has a DSCR of 1.18. Above 1.00 the income covers the payments; below it, it does not.
Yes, if your business will occupy the building. The SBA 504 and 7(a) programs can both be used to buy, build or improve owner-occupied commercial real estate. Neither program finances property held as an investment and rented to others. The SBA publishes the current limits and terms on its own site.
No. The calculator runs in your browser and sends nothing to us. The numbers are kept in the page address only so you can bookmark the page or send it to someone.
Read more about longer-term financing
- SBA and bank loansLonger terms through bank partners, and what a bank file asks for.
- Construction financingHow funding works when you are building or renovating rather than buying.
- Equipment financingLoans and leases for the machines and vehicles that go inside the building.
- Merchant cash advance vs loanHow the two differ in cost, speed, paperwork and what happens when sales slow.
