Commercial Loan Calculator: Estimate Your Monthly Mortgage Payments

Have you purchased or will you be purchasing commercial real estate? Use our Commercial Loan Calculator to estimate your monthly payments.

Finding the right loan for commercial real estate purchases is critical. If you’ve been in business for 3+ years, plan on occupying at least 51% of the building, and have a credit score above 675, you may qualify for an SBA 7(a) loan with SmartBiz. SmartBiz offers rates as low as 7.00% and loans up to $5MM. Pre-qualify online in minutes.

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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.

Inputs

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.

Outputs

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, CDC 504 lenders, hard money lenders, bridge loan providers, 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.

Commercial real estate lenders come in many varieties. Partnering with a national broker who works with lenders in the SBA’s Preferred Lender Program is recommended. One such company is SmartBiz. Prequalify online in minutes and receive an SBA 7(a) loan up to $5MM with rates as low as 7.00%.

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Bottom Line

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.