Commercial mortgage calculator

What the three numbers mean

The monthly payment is principal and interest only. Taxes, insurance and reserve deposits sit on top of it, and most commercial lenders collect them through escrow. Annual debt service is twelve of those payments, and it is the figure a lender divides into net operating income to get the coverage ratio. The balloon is whatever principal is still owed on the maturity date. A standard agency note puts it plainly: Whatever principal remains on the maturity date is due in full². The plan to repay it (a refinance or a sale) is part of the deal from day one.

Why commercial payments look different from a home loan

A home loan usually amortizes over its whole term. A commercial loan usually does not. The 2025 HMDA filings for multifamily loans show the pattern: a 120-month (10-year) median term³; 75.2% carried a balloon payment³; and 41.2% had an interest-only period³. The usual shape is a long amortization, a shorter term and a large balloon.

Bank, life company, CMBS and debt fund loans have no single published rule. Banks often pair a short term with a much longer schedule; CMBS conduit loans are frequently interest only for the whole term (the calculator handles that with amortization set to 0).

Worked example

Illustration, not a quote: a $2,000,000 loan at 6.50% on a 30-year amortization with a 10-year term pays $12,641.36 a month, or $151,696.33 a year. After 120 payments it has repaid $304,477.47 of principal and owes a balloon of $1,695,522.53.

• Add 24 interest-only months and the first two years cost $10,833.33 a month, but the balloon rises to $1,773,133.55: $77,611 more to refinance in year 10.
• Shorten the amortization to 25 years and the payment rises to $13,504.14, while the balloon falls to $1,550,227.19. Lenders shorten amortization on older buildings and riskier property types for exactly this reason.

Edge cases the calculator flags

• Interest-only longer than the term. The loan never amortizes and the balloon equals the loan amount.
• Amortization shorter than the term. The loan pays off before maturity and there is no balloon.
• Floating rates. The payment shown holds only while the index stays where it is today. A SOFR loan's payment moves every month; lenders usually require a rate cap. Run the payment at a higher rate to see the stress case.
• Actual/360 interest. Many agency and CMBS notes charge interest on actual days over a 360-day year. In one recent conduit deal: Every loan in the BANK5 2026-5YR24 pool accrues interest on an Actual/360 basis⁸. That collects slightly more than the stated rate over a year. The interest-only vs amortizing calculator shows the month-by-month difference.

What a lender does with this

The payment feeds the coverage test, and an interest-only period does not always help there: Freddie Mac tests DCR on interest-only loans using an amortizing payment, not the interest-only payment⁵. So interest-only months can lower what you pay without raising the loan you qualify for. To see the largest loan your income supports, use the DSCR calculator or the loan sizer. If the balloon is the worry, the refinance gap calculator tests whether a new loan at maturity would cover it.

Method and formula

monthly rate i = annual rate / 12 payment = L x i / (1 - (1 + i)^-n) n = amortization in months balance after k payments = L x (1 + i)^k - payment x ((1 + i)^k - 1) / i interest-only payment = L x i; balloon = balance after (term - IO months) amortizing payments

The balance follows the actuarial method. Each period the balance grows by interest earned and falls by the payment made; the remainder at maturity is the balloon⁹. Interest accrues on the 30/360 convention. 30/360: interest is computed on twelve 30-day months, so every monthly interest amount is the same¹⁰. The payment formula is the same one the loan sizer and the program pages use, and the calculator is checked against independent test vectors, including figures printed in executed agency loan documents (methodology).