Commercial Mortgage Calculator

Complete Guide: Commercial Mortgage Calculator

A commercial mortgage is a loan secured by income-producing property such as multifamily, office, retail, industrial, or mixed-use buildings. Lenders typically size the loan using two guardrails: a maximum loan-to-value (LTV) percentage based on property value, and a minimum debt service coverage ratio (DSCR) based on net operating income (NOI). This calculator helps you estimate the maximum loan supported by both tests, monthly payment, and any balloon balance at the end of the term.

Key Concepts: LTV, DSCR, Amortization, Balloon

• Loan-to-Value (LTV): Maximum loan as a percent of property value. Many programs target 65–80% depending on asset type and market risk.
• Debt Service Coverage Ratio (DSCR): NOI divided by annual debt service. Lenders often require 1.20–1.35; 1.25 is a common threshold.
• Amortization vs. Term: Amortization (e.g., 25 years) sets the payment schedule, while the term (e.g., 5–10 years) is when the loan matures and a balloon may be due.
• Cap Rate: If you do not have a recent appraisal, you can estimate value as NOI divided by the market cap rate (e.g., 7%).

How We Calculate

We apply standard amortizing loan formulas and underwriting tests:

• Payment Factor: Monthly payment per $1 of loan = r * (1 + r)^n / ((1 + r)^n - 1), with r the monthly rate and n the amortization months.
• Max Loan by DSCR: Allowable annual debt service = NOI / Min DSCR. Convert to a monthly limit and divide by the payment factor.
• Max Loan by LTV: Property value × Max LTV.
• Final Maximum Loan: The lesser of the DSCR-limited and LTV-limited amounts.
• Balloon at Term: Remaining balance after termYears payments on a longer amortization.

Worked Example

Suppose a $2.0M property produces $160,000 NOI. With a 7.25% interest rate, 25-year amortization, 5-year term, 75% Max LTV, and 1.25 Min DSCR:

• LTV Test: $2,000,000 × 75% = $1,500,000.
• DSCR Test: Allowable annual debt = $160,000 / 1.25 = $128,000 (or $10,666/month). With a 25-year amortization at 7.25%, the monthly payment factor translates to a maximum loan near $1.4–$1.5M.
• The calculator selects the lower of the two as the final maximum and shows the balloon due after 60 payments if the loan does not fully amortize.

When to Use Cap Rate vs. Appraised Value

If you have a credible appraisal or recent sale comp, enter the property value directly. Otherwise, use the NOI and market cap rate to estimate value. Remember that cap rate is a market opinion and can move with interest rates, property type, and local supply-demand conditions.

Underwriting Tips

• Stabilize NOI: Normalize rent roll and apply market vacancy and reserves to avoid overstating income.
• Stress-Test Rate: Evaluate +100 bps and +200 bps to understand sensitivity of DSCR and maximum proceeds.
• Mind the Term: A shorter term increases the balloon risk. Confirm refinance ability under stressed rates.
• Asset-Type Nuance: Multifamily may allow higher LTVs than specialty or single-tenant properties.

What This Calculator Does Not Include

Closing costs, interest-only periods, adjustable-rate structures, and lender-specific reserves are not modeled in this simple tool. For a full credit memo, include these items and consider speaking with a lender or advisor.

Why It Matters

Understanding both DSCR and LTV helps you set realistic expectations for maximum proceeds and monthly payments. With a clear view of amortization and potential balloon, you can plan refinance timing, equity needs, and risk mitigation strategies with confidence.