Multifamily Mortgage Calculator

Taking on a commercial mortgage may seem like an intimidating task. The reality is that there's no shortcut to getting the commercial real estate financing you need. That said, the experts at Multifamily Loans strongly believe that having the right knowledge and tools puts you in the best possible position to get the financing you deserve.

One such tool is our multifamily mortgage calculator, which can estimate the monthly payments owed on a multifamily mortgage. All you have to do is input the loan amount and interest rate, then set the amortization and term length to see the monthly payment figure over time. Note that the monthly payment shown includes only principal and interest. Depending on the lender involved, the financing may have included escrow for taxes, replacement reserves, etc. These figures should also be considered to get a more accurate estimation of the expected monthly payment. Many prospective borrowers use this helpful tool while shopping around for commercial properties in order to determine what lies within their price range. It can also be an invaluable tool when refinancing an existing commercial property loan. The included amortization schedule depicts the amortization over the selected term, which is often an overlooked aspect in calculating monthly payments. In some cases, the amortization impacts the monthly payment moreso than the actual interest rate!

Our commercial mortgage calculator helps you calculate:

• Principal and interest (P&I) payments

• Interest-only payments

• Balloon payments

The principal is the loan amount you will be applying for. How much it is depends on what your current finances and future business prospects can handle. Taken into consideration on the principal amount will be how much revenue the property will yield (Net Operating Income) and how much your total assets cover in relation to your total debt (Loan To Value) among other factors. The industry median interest rate for commercial mortgages is approximately 3% above the federal rate. The amount of interest that will be charged specifically to your loan will largely be determined by your credit score. Multifamily.Loans Inc will give you access to the industry’s best loan rates no matter the property type, location or size.

A balloon payment schedule involves the borrower paying off the loan in small amounts with a large (balloon) payments during the loan term. Balloon payments can be a heavy shock to your finances, so the team at Multifamily.Loans will ensure that your cash flow is prepared to handle balloon payments with ease throughout your loan term. The loan term is the duration of time that you will have to pay off the loan. Loan terms for commercial property is usually about 15 to 30 years. The loan term will affect whether your installments are big or small but they also affect how much you would have paid off at the end of the loan.

While our focus is mainly on commercial real estate loans, such as bank financing, CMBS loans, or HUD multifamily loans, it may be of interest to business owners that SBA loans, loans guaranteed by the U.S. Small Business Administration, can fund equipment and working capital as well as commercial real estate.

Documentation Requirements for Commercial Mortgages

While documentation requirements for commercial loans vary from lender to lender, in general, lenders will require:

• Asset statements

• Corporate documents

• Personal financial records

If the borrower is a business, particularly one which plans to occupy the building, additional information such as current leases, as well as other corporate documentation may be needed.

The more documentation required, the longer it may take to close the loan. In general, most commercial real estate loans, including CMBS and bank loans, will take approximately 3 months to close. While many lenders claim that they can close loans in 6 weeks or less, this is rarely the case. One major exception is hard money loans, which generally carry significantly higher interest rates (usually above 10%), and are often used for situations when a borrower has bad credit or legal issues. Hard money loans can often be funded in as little as one week.

Helpful Loan Terms & Definitions

We've gone ahead and gathered some useful terms and definitions to help you on your way to acquiring the right commercial real estate loan to suit your needs.

Amortization: A method of paying off a debt using a fixed repayment schedule agreed between the borrower and the lender. With amortization, payments consisting of both principal and and interest (as specified in the loan agreement) are paid off over a set period of time. The structure typically involves a declining payment of interest, where more interest is paid (in comparison to principal) towards the beginning of the repayment and gradually decreases over time, allowing more principal to be paid towards the end of the loan term.

Balloon Payment: a term used to describe the large payment sum due towards the end of a commercial or amortized loan. Balloon payments usually occur for loans with short loan terms, and when only a portion of the principal is amortized.
⁠Hint: How to avoid a baloon payment →

Collateral: Assets or property of value introduced to the lender as assurance of worth in order to secure the loan. If a situation arises where the borrower stops making payments towards the debt (whether intentionally or due to unforeseen circumstance), The lender can seize the collateral in order to cover their loss. These claims to collateral assets by lenders are known as liens. When the loan amount is paid in full, the assets are no longer deemed as collateral. Typically, Loans secured by collateral tend to have lower interest rates. 

Debt Service Coverage Ratio (DSCR): Simply, DSCR is a way to quantify the borrower’s ability to pay back outstanding debt obligations. A borrower's "debt service" is the cash flow required to cover a standard payment of principal and interest on a debt within a payment period. The borrower's net operating income is also required to determine the debt service coverage ratio. The formula to determine DSCR is Net Operating income ÷ Total Debt Service. If the resulting value is greater than one, it exhibits the borrower is capable of repaying their debt. conversely, a value less than one would mean an inability to cover the debt service.

Loan To Value Ratio (LTV): A figure that represents the ratio of a debt in relation to the value of the collateral involved. The LTV is used by lenders in order to quantify borrower leverage, as well as determine the level of risk involved in lending the specified sum. The formula for LTV is Loan Amount ÷ Total Value (of the collateral).

Debt Yield: A figure that represents the income a property generates in comparison to the amount of a loan that a lender has issued for the property. This figure basically represents the cash-on-cash return that a lender would get if they had to foreclose on a commercial property. The formula for debt yield is Net Operating Income ÷ Loan Amount.

Maturity Date: Denotes the date that the final principal payment on a loan is to be paid. The maturity date is often viewed as the "lifespan" of a loan.  Once the last principal payment is met, interest payments also cease, and the debt is considered fulfilled.

Prime Rate: This standard of comparison for interest rates offered by lenders is essentially the interest rate given to a lender's most creditworthy clients. Also known as the prime lending rate, it is based on the verifiable assumption that these larger commercial borrowers have a much lower risk of defaulting on a payment.

Principal and Interest (P&I): Payments on debts are typically broken down into two basic units. The first is known as "Principal". Principal refers to the original sum of money borrowed from a lender while Interest can simply be described as an amount derived as a percentage of the principal that acts as the fee for borrowing from the lender.

Refinance: When a borrower meets with a lender to revise any previous payment schedule on a loan. When a debt is refinanced, the original loan is considered "paid off" and replaced with the newly revised pay schedule which is viewed as a new loan altogether. 

Prepayment Penalty: A fee charged to a commercial borrower if they attempt to repay a loan early. Prepayment penalties often come in the form of step-down prepayment penalties, which often start at a specific percentage and go down by 1% per year. However, for CMBS and conduit loans, they usually are offered in the form of yield maintenance or defeasance. Yield maintenance requires a borrower to make a payment to a lender that compensates them for all the interest returns they would have gained had the borrower not paid off the loan early. Defeasance occurs when a borrower purchases a basket of securities (typically U.S. Treasury bonds) in order to replace the collateral of their loan.

Non-Recourse: A non-recourse loan is one in which a lender cannot attempt to go after a borrower’s personal assets if they default on their debt. However, most non-recourse loans have “bad boy” carve-outs, which stipulate that the loan will become a full recourse financial product should the borrower violate certain rules, such as intentionally declaring bankruptcy or giving misleading financial information to the lender.

For an accurate estimate, fill out the form below for a risk-free consultation with one of our multifamily mortgage professionals.

If you're looking for a calculator specifically tailored for mortgages covering non-multifamily, commercial real estate assets, you can visit our commercial mortgage calculator page on Commercial Real Estate Loans.