Commercial Mortgage Calculator
Calculate your monthly commercial mortgage payment on a 15- to 30-year amortization schedule, the balloon balance due at maturity (3, 5, 7 or 10 years), and the three underwriting ratios lenders check: LTV, DSCR, and Debt Yield.
Commercial mortgage, balloon payoff & DSCR calculator
Commercial mortgage underwriting benchmarks
| Metric | Formula | Typical lender rule |
|---|---|---|
| Loan-to-Value (LTV) | Loan Amount ÷ Property Value | 65% – 75% max (90% SBA 504) |
| Debt Service Coverage Ratio (DSCR) | Annual NOI ÷ Annual Debt Service | 1.25x or higher |
| Debt Yield | Annual NOI ÷ Total Loan Amount | 9.5% – 10.5%+ minimum |
| Balloon Balance at Month B | Loan × [(1+r)^N − (1+r)^B] ÷ [(1+r)^N − 1] | Refinanced or paid at Year 5/7/10 |
Commercial Mortgage Worked Example: 25-Year Amortization with 5-Year Balloon
On a $1,500,000 commercial property with 25% down ($1,125,000 loan) at 6.75% amortized over 25 years with a 5-year balloon and $120,000 annual NOI, the monthly payment is $7,772.75 ($93,273/year). That produces a 1.29x DSCR and a 10.67% Debt Yield—passing standard 1.25x and 10% underwriting gates—with a balloon payoff of $1,019,842 due at the end of Year 5.
Common questions
How does a 25-year amortization with a 5-year balloon work?
Your monthly payment is calculated as if the loan will be paid off over 25 years (300 months), keeping monthly payments lower, while the remaining principal balance comes due in a single lump sum after 5 years (60 months).
What is Debt Yield on a commercial mortgage?
Debt Yield equals Annual Net Operating Income (NOI) divided by the total loan amount. Unlike DSCR, it isn't affected by amortization length or interest rates; most lenders require at least 9.5% to 10%.
What is the Actual/360 interest calculation on commercial loans?
Many commercial banks divide the annual interest rate by 360 days and multiply by 365 days billed per year, which raises the effective interest rate by 365/360 (1.389%).
Sources
- Fannie Mae Multifamily Underwriting & DSCR Standards
- U.S. Small Business Administration: SBA 504 Commercial Real Estate Loans
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General information, not financial, tax or legal advice. Check important numbers with the official source before acting on them.