This tool calculates monthly payments for commercial property loans, including options for Principal & Interest, Interest-Only, and Balloon payments. It also provides a detailed monthly amortization schedule. The calculator automatically determines the balloon payment based on the loan’s amortization period.
If you already know the balloon payment amount and want to work backwards, please use our dedicated Balloon Loan Calculator instead
Commercial Property Loan Calculator
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Current Commercial Mortgage Rates
| Commercial Mortgage Loan Providers | Rates |
| Freddie Mac Optigo | 6.39% – 8.01% |
| Fannie Mae | 6.49% – 7.81% |
| HUD 223(f) | 6.25% – 7.30% |
| CMBS | 6.46% – 7.95% |
| Regional Banks/Credit Unions | 6.95% – 10.50% |
| Life Insurance Companies | 6.21% – 7.11% |
| Debt Funds | 9.07% – 15.32% |
| HUD 221(d)(4) | 6.85% – 7.90% |
Note: The range of commercial mortgage rates should be considered typical. However, there are outliers on the high and low end of the range. Thus, these figures do not guarantee actual rates on a specific commercial mortgage deal. To see which options you qualify for & get the best deal you can we recommend contacting a commercial mortgage broker who can help you see what you qualify for.
The Complete Guide to Understanding Commercial Mortgages (Made Easy)
Whether you’re starting a new business or expanding an existing one, you’ll need more than just great ideas—you’ll also need funding. One of the most important investments you can make is securing the right commercial property. Owning your own space helps you save on rising rental costs and gives your business more financial flexibility in the long run.
That’s where commercial mortgages come in.
This guide breaks down everything you need to know about commercial mortgages: how they work, how to qualify, typical loan terms, payment options, interest rates, and where to find financing.
What is a Commercial Mortgage?
A commercial mortgage is a loan used to buy or improve property for business use. It works a lot like a home mortgage—but instead of buying a house to live in, you’re buying a property for your business.
What Can You Use It For?
Businesses use commercial mortgages to:
- Buy commercial property like offices, shops, or warehouses
- Renovate or improve their current business space
- Develop land for commercial use
- Purchase property to lease out (buy-to-let for business)
Some common examples of properties that need commercial mortgages include:
- Apartment buildings
- Restaurants and cafes
- Office spaces
- Retail stores and shopping centers
- Industrial facilities
How Commercial Mortgages Work
Commercial mortgages are typically secured loans. This means the property you’re buying is used as collateral—if you fail to repay the loan, the lender can take ownership of the property.
Unlike residential loans (which often last up to 30 years), commercial mortgage terms are usually shorter—3, 5, 10, or up to 25 years. Some government-backed loans may go up to 40 years.
Payment Options
There are a few different ways you might pay back a commercial loan:
- Amortized Payments: Regular monthly payments include both interest and a portion of the principal (loan amount).
- Interest-Only Payments: You only pay the interest for the loan term. At the end, you’ll need to pay off the full loan amount in one go—this is called a balloon payment.
- Fully Amortized Loans: These are structured so that the loan is completely paid off by the end of the term, without a balloon payment.
Commercial Loan Example
Let’s say you borrow $2.5 million at 9% interest for a 10-year term.
Here’s how your payments could look:
| Payment Type | Monthly Amount |
| Principal + Interest | $20,155.80/month |
| Interest-Only Payment | $18,787.00/month |
| Final Balloon Payment | $2,240,215.07 |
So, if you choose interest-only payments, you’ll pay less each month—but you’ll owe a big payment at the end.
Commercial Real Estate Interest Rates
Commercial mortgage rates are generally higher than residential mortgage rates, usually by 0.25% to 0.75%. Rates can vary depending on the property type, loan size, your credit profile, and market conditions. For example:
- A retail store or office may have a lower rate.
- A motel (which needs more hands-on management) may have a higher rate.
Typical commercial loan interest rates can range from 1.18% to 12%.
What Affects Commercial Loan Rates?
Lenders base their rates on different market indexes. These include:
1. Prime Rate
The interest rate that banks offer to their best (most trustworthy) customers. If your loan is tied to this, your rate depends on your lender’s prime rate.
2. LIBOR (London Inter-Bank Offered Rate)
This used to be a common benchmark for setting interest rates. While it’s being phased out globally, it still influences some loans.
3. U.S. Treasury Bonds
Especially the 10-Year Treasury Note, which acts as a guide for both residential and commercial mortgage rates. It’s backed by the U.S. government and considered very safe.
4. Swap Spreads
This is the difference between fixed interest rates and the yield on government bonds. It helps predict where rates might go in the future.
Interest Rate Comparison from 2020 vs 2022
| Lender | 2020 Midpoint Rate | 2022 Midpoint Rate | Rate Increase (%) |
| Freddie Mac Optigo | 4.01% | 5.55% | 38.40% |
| Fannie Mae | 3.76% | 5.32% | 41.54% |
| HUD 223(f) | 2.55% | 4.55% | 78.43% |
| CMBS | 3.70% | 5.55% | 50.07% |
| Regional Banks/Credit Unions | 4.18% | 6.13% | 46.53% |
| Life Insurance Companies | 4.00% | 4.77% | 19.25% |
| Debt Funds | 7.25% | 9.25% | 27.61% |
| HUD 221(d)(4) | 3.28% | 5.15% | 57.25% |
How to Qualify for a Commercial Mortgage
Qualifying for a commercial mortgage takes more paperwork than a residential loan. Lenders will review:
- Your business finances and cash flow
- Your credit history (both personal and business)
- Property details and value
- Your business plan (for startups)
You’ll also need a larger down payment usually 20% to 50% of the property’s value.
The Bottom Line
A commercial mortgage can be a powerful tool to grow your business. Whether you’re buying a new office, upgrading your location, or investing in rental property, owning real estate can give you long-term stability and reduce costs.
Though the process can be more complex than getting a home loan, the benefits—like building equity, locking in your expenses, and gaining control over your property—are worth it.
Tip: Work with a financial advisor or mortgage broker to find the best commercial loan option for your business. for real estate tax or property tax calculator
