Commercial Real Estate Loan Calculator

Commercial real estate loans use a long amortization (usually 25 years) paired with a short loan term (commonly 5, 7, or 10 years). At term end, you owe a balloon — the remaining principal — and must refinance or sell. A $1M loan at 7% on a 5-year term / 25-year schedule runs ~$7,068/month with an ~$897,000 balloon.

Loan amount

Interest rate (APR)

Amortization period

What the monthly payment is based on

Loan term (balloon due)

When the full balance comes due

Fill in loan amount and APR to see monthly payment and balloon.

0 of 2 filled in.

How commercial real estate loans work

Commercial real estate (CRE) loans differ from residential mortgages in one big way: they usually have a balloon. A typical CRE loan amortizes like a 20 or 25-year mortgage — low monthly payment — but matures (balloon due in full) at 5, 7, or 10 years. At maturity, the borrower refinances, sells, or pays off the remaining balance.

Two reasons lenders structure CRE loans this way:

Interest rate risk. Commercial banks don't want to commit to a fixed rate for 25 years. A shorter loan term lets them re-price the loan (or require the borrower to refinance) before inflation or market rates eat their margin.
Borrower discipline. The balloon forces the property to perform — if rents don't support a refinance in 7-10 years, the borrower has to sell.

Common structures:

Portfolio loans from banks: 25-year amortization, 5-10 year term, fixed or floating rate
CMBS loans (securitized, institutional): 25-30 year amortization, 10-year term, fixed rate, non-recourse
Life insurance company loans: long-term fixed rate, 20-30 year amortization, 10-15 year term — the cheapest CRE money if you qualify
Small business CRE (SBA 504): 25-year amortization, 25-year term — fully amortizing, unusual for the space

Formula

Two separate calculations:

1. Monthly payment — same amortization formula as a residential mortgage, using the amortization term (not the loan term):

monthly_payment = loan × (r × (1+r)^N) / ((1+r)^N − 1)

With r = APR ÷ 12, N = amortization years × 12.

2. Balloon at maturity — the remaining loan balance at the end of the loan term. Using the amortization schedule, the balance after n months (where n = loan term in months) is:

balance_n = loan × (1+r)^n − monthly_payment × ((1+r)^n − 1) / r

The balloon is typically 60-80% of the original loan balance after 10 years on a 25-year amortization, depending on the rate.

When loan term equals amortization term, there is no balloon — the loan pays off on schedule with no lump-sum due.

Scenarios at a glance

Monthly payment and balloon on a $1,000,000 loan at 7.0% with a 25-year amortization schedule:

Loan term	Monthly payment	Balloon owed at maturity	Balloon as % of original
5 years	$7,068	~$897,000	90%
7 years	$7,068	~$852,000	85%
10 years	$7,068	~$770,000	77%
25 years (self-amortizing)	$7,068	$0	0%

The shorter the term, the larger the balloon — because you've paid more interest and less principal at maturity.

Worked example

A small medical office building is for sale for $1,500,000. Raj puts 30% down and borrows $1,050,000 from a regional bank at 7.5% fixed for 10 years with a 25-year amortization.

Loan: $1,050,000
APR: 7.5%
Amortization: 25 years
Loan term: 10 years (balloon)

Calculator output:

Monthly payment: $7,760
Balloon at year 10: ~$808,000 (the remaining balance on the 25-year schedule)
Total interest paid (first 10 years): $689,210
Total paid during the 10-year term: $1,739,210 (monthly payments + balloon)

At year 10, Raj has three options:

Refinance the $808,000 into a new commercial loan. Success depends on property value holding up and his business's financials supporting the new underwriting.
Sell the property. If the building is still worth $1.5M and he owes $808k, he walks away with ~$692k (before sale costs).
Pay off with cash or a different instrument.

If Raj doesn't want a balloon, he could push the lender for a 20-year term on a 20-year amortization — fully amortizing, no balloon. Rate will be higher (maybe 7.75-8% instead of 7.5%) because the lender is holding rate risk for longer.

FAQ

What's the difference between amortization and term?

Amortization is the number of years the monthly payment is calculated against (e.g., 25 years). Loan term is when the full balance is due (e.g., 10 years). A 25/10 loan: pay like a 25-year mortgage for 10 years, then owe the remaining balance.

What's a typical commercial loan rate in 2026?

For owner-occupied commercial real estate: Prime + 0.5-2% (currently ~9-10.5%) or fixed at 7-8% on 10-year terms. For investment CRE (rentals, multifamily 5+ units, industrial): add 50-100 basis points. SBA 504 and life company loans price below market when you qualify.

Do commercial loans have prepayment penalties?

Usually yes — and more aggressive than residential. Two common structures:

Yield maintenance: you owe the lender the present value of all remaining interest if you prepay. Can be enormous on a 10-year loan prepaid in year 2.
Defeasance: you replace the loan with a Treasury-backed cash flow stream. Complex and expensive.

Some loans have step-downs (5% in year 1, 4% in year 2, etc.) that match residential. Read the loan documents carefully before signing a non-recourse CMBS loan, which almost always has yield maintenance.

Is CRE interest tax-deductible?

Yes, as a business expense. Interest, property taxes, depreciation (39-year straight-line for commercial buildings), and operating expenses all offset rental or business income.

What DSCR do I need to qualify?

Most commercial lenders require a Debt Service Coverage Ratio (DSCR) of 1.20-1.35 — meaning the property's net operating income must be 1.20-1.35x the annual debt service. Higher DSCR = more conservative loan; lower DSCR = lender takes more risk.

Can I negotiate a longer loan term to avoid the balloon?

Sometimes. Community banks and credit unions are more flexible than national banks and CMBS. Expect a higher rate or lower LTV cap in exchange. Most borrowers accept the balloon and plan to refinance at maturity.