Commercial property payments with balloons, DSCR and LTV — the way lenders actually quote
$—
Monthly Payment
$—
Balloon Due at Year 7
—
DSCR (Need ≥ 1.25)
Test
Your deal
Typical requirement
Verdict
Remaining balance Interest paid to date Total paid to date
Interest is charged on the balance left each month, which is why early payments are mostly interest and later ones are mostly principal.
Commercial mortgages speak a different language from home loans: the borrower that matters is the property, the qualification is its income (DSCR), the loan usually ends in a balloon long before it amortizes, and everything is negotiated. This calculator quotes the way lenders do — amortization and balloon separated, DSCR and LTV tested — so you can see which constraint binds your deal before a banker tells you.
The Two Tests That Size Every Commercial Loan
Test
Formula
Typical bar
DSCR — debt service coverage
Net Operating Income ÷ annual debt payments
≥ 1.20–1.30x (banks); 1.25x standard
LTV — loan to value
Loan ÷ appraised value
≤ 70–80% by property type
The lender computes the maximum loan under each test and offers the smaller — the calculator's note tells you which one binds. Weak NOI can't be fixed with a bigger down payment beyond a point; strong NOI can't rescue an inflated price past the LTV cap. This dual-test logic is the entire underwriting, and internalizing it is what separates fundable offers from wishes.
The Balloon Structure (Standard, Not Scary — If Planned)
A typical quote — "7/25 at 7.25%" — means payments calculated on a 25-year amortization, with the remaining balance due as a balloon at year 7. On the default deal, that balloon is roughly $960,000. The plan for it is refinancing or sale; the risk is meeting that date in a bad credit market (ask anyone who ballooned in 2009 or 2023). Mitigations: longer balloons, extension options written into the note, and starting refinance conversations at year 5, not month 83.
Where Commercial Money Comes From
Local/regional banks: the workhorse — recourse loans, 5–10 year balloons, relationship-priced.
SBA 504/7(a): owner-occupied businesses (51%+ occupancy) get 10–15% down and long fixed terms — by far the best structure for buying your business's building.
Credit unions: increasingly competitive, sometimes without prepayment penalties.
CMBS/agency/life-co: larger, stabilized properties; non-recourse but rigid.
Recourse note: most bank loans require personal guarantees — your house backs the strip mall unless negotiated otherwise. Ask early.
NOI: Garbage In, Garbage Out
Net Operating Income = real revenue − real operating expenses (taxes, insurance, maintenance, management, reserves) — excluding debt service and depreciation. Sellers' pro-formas inflate NOI with fantasy rents and forgotten expenses; underwrite from actual leases and trailing-12 financials, and haircut anything "projected." Your DSCR — and therefore your loan — is only as honest as this number. The Cap Rate Calculator pressure-tests the price against the same NOI.
How to Use the Calculator
Enter price, down payment, quoted rate, amortization and balloon.
Enter the property's honest NOI.
Read the payment, the balloon, and the test table — the note names your binding constraint and its fix.
Frequently Asked Questions
Why are commercial rates higher than residential?
No government guarantee buys the loans, terms are shorter, and default risk concentrates in single properties. Expect 0.5–2% above residential, better for strong sponsors and stabilized assets.
What does a lender mean by 'recourse'?
You personally guarantee the debt — default and they can pursue your other assets. Non-recourse (CMBS, agency) limits them to the property, with carve-outs for fraud/waste ('bad boy' clauses). Recourse is negotiable at good banks for strong deals; always ask.
What DSCR should I target, not just pass?
1.25x is passing; 1.4x+ is comfortable — it survives a vacancy or a tax reassessment without a capital call. Deals engineered to exactly 1.25x have no room for reality.
How does SBA financing change the math?
For owner-occupied property, dramatically: SBA 504 pairs a bank first (50%) with a subsidized fixed-rate debenture (35%), leaving 10–15% down and no balloon on the SBA piece. If your business will occupy 51%+, price SBA before anything conventional.
What are commercial closing costs?
Heavier than residential: appraisal ($2–10k), environmental Phase I ($2–5k), legal on both sides, lender fees ~1%, title at commercial rates. Budget 2–4% of the loan plus third-party reports.
Can I get 30-year fixed commercial money?
Rarely from banks — long fixed terms live with agency lenders (multifamily) and SBA. The bank standard is the balloon structure this calculator models; the 30-year fixed you know from home loans basically doesn't exist here.
Is my information private?
Yes — every figure computes locally in your browser.
Commercial lending is a negotiation between your NOI and the lender's two tests. Walk in knowing your DSCR, your binding constraint, and your balloon plan, and you'll be quoted like a sponsor instead of processed like an applicant.