Have you purchased or will you be purchasing commercial real estate? Use our Commercial Loan Calculator to estimate your monthly payments.
This calculator is designed for commercial real estate loans that have an interest rate reset. This means that you pay a fixed rate on a loan for a certain period of time, at which point the interest rate may change based on market conditions. The Commercial Loan Calculator will estimate your monthly payments before and after the interest rate reset, as well as the amount of money you will pay over the life of the loan.
For a free consultation, request a call with SmartBiz, our recommended commercial real estate lender. If you’d like to learn more about how to get a commercial real estate loan, you can also check out Commercial Real Estate Loans: How to Get A Loan for Income-Producing Property or our article on SBA 504 Loans.
How the Commercial Loan Calculator Works
Commercial Real Estate Loans (often just called commercial loans) occupy a unique place among business loans. They are secured by real estate, which has high value as collateral. For this reason, commercial loan terms are usually quite favorable for borrowers, with interest rates currently between 4-6 % and 10-20 year terms common.
This Commercial Loan Calculator is designed for commercial real estate loans with an interest rate reset. In this common type of commercial loan, you pay a fixed rate for a certain number of years. At that point, your interest rate may change based on market conditions. The new interest rate may be higher than, lower than, or the same as your initial interest rate. The reset date and how the new interest rate is determined are specified in your loan documents.
Another type of commercial real estate loan is called a balloon loan. In a balloon loan, you make relatively low monthly payments throughout the term of the loan, and at the end, you pay the remaining balance in a big lump sum payment. This calculator is not designed for balloon loans (for a balloon loan calculator, click here).
Based on the information you provide, our calculator will estimate what your monthly payments will be before and after the interest rate reset, as well as what you will pay over the life of the loan. Here’s how to use the Commercial Loan Calculator.
Amount of Loan: Put in the principal amount of the loan here.
Origination fee: Sometimes, lenders charge an up-front fee for processing a loan application. This fee is subtracted from the loan before the funds are disbursed to you. This is called an origination fee. Identify the origination fee in the calculator–slide the bar to zero if there’s no origination fee.
Original Interest Rate: Select the initial interest rate of the loan.
Term of Loan: Identify the repayment term of the loan.
Year Until Interest Rate Reset: This is the number of years until the interest rate resets. The reset date will be shown in your Letter of Interest or Loan Agreement. If you’re unsure about it, ask your lender.
Interest Rate at Reset: Identify what the interest rate will be after the reset. The interest rate is usually pegged to a market rate. Again, how the new interest rate will be calculated should be shown in your Letter of Interest or Loan Agreement. If you’re unsure what the rate will be, ask your lender.
Original monthly payment: The original monthly payment is the estimated monthly payment before the reset date.
Monthly payment after reset: This is the estimated monthly payment after the reset date. This may be higher than, lower than, or the same as the original monthly payment. Right now, interest rates are rising, so you can expect the monthly payment to increase after the reset.
Total payment amount over life of loan: Commercial loans are amortizing loans, which means the principal and interest are paid down over the life of the loan until the balance is zero. The Commercial Loan Calculator will tell how much you will pay back in total (principal+interest) over the life of the loan.
Need Help Obtaining a Commercial Loan?
There are thousands of commercial real estate loan providers out there, including banks, hard money lenders, and online lenders. Each lender will vary significantly in terms of qualification requirements, cost, and repayment terms, but in general, you will need the following to qualify for a commercial loan:
- Personal credit score above 680 (check your credit score for free here).
- Down payment of 10-20 percent.
- Debt Service Coverage Ratio (DSCR) of at least 1.25. DSCR compares your annual net income (personal and business income after expenses are accounted for) to your annual debt and interest payments. For example, if your annual net income is $100,000 and your annual debt and interest payments (for all debts) are $50,000, then your DSCR is 2.
If you want to learn more about commercial real estate loans, read our in-depth article. If you’re buying a property to operate your own business out of, have been in business 3+ years, have a credit score above 680 (check here for free) and 15% down payment, consider speaking with SmartBiz. They can prequalify you in minutes for a long term SBA 7a loan for commercial real estate.
A commercial real estate loan is a big investment in your business and in your future. Using our Commercial Loan Calculator, you can plan ahead. Find out your monthly payments now and years from now when the interest rate resets.