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Commercial mortgage calculator
Commercial lenders care about two numbers above all: debt service cover and loan to value. This calculator shows both, alongside the monthly payment under three repayment structures.
DSCR thresholds, amortisation profiles and LTV caps vary widely by lender and asset class. Tell us about the property and we will place it.
How this calculator works
The loan amount is simply the purchase price less your deposit. The interesting work is in the repayment profile and the cover test, because those are what decide whether a commercial lender will actually advance the figure you want.
For a capital repayment loan we use the standard amortisation formula, spreading capital and interest evenly over the term so the balance reaches zero at maturity. For interest-only, the monthly payment is just the loan multiplied by the annual rate, divided by twelve, with the full balance repayable at the end. The part-amortising option, common on commercial investment deals, splits the loan in half: 50 per cent amortises over the term while the other 50 per cent runs interest-only, leaving a residual balloon at maturity. It is a useful middle ground that improves cashflow without leaving the whole debt outstanding.
The interest cover figure, often called DSCR (debt service cover ratio), divides the annual passing rent by the annual debt service. Most commercial lenders want to see at least 1.25x, meaning the rent covers the payments with a 25 per cent margin, and some want 1.4x or more for secondary assets or shorter leases. If the calculator shows a fail against 1.25x, that does not necessarily kill the deal, but it does mean the lender will either reduce the loan, extend the amortisation period, or price for the additional risk.
Loan to value works differently in commercial lending than in buy-to-let. Whereas a standard BTL can reach 80 per cent, commercial investment typically caps at 65 to 70 per cent of the lower of price and valuation, and the valuation itself may come in below the purchase price if the lease is short or the covenant weak. The DSCR and the LTV cap interact: on higher-yielding assets the LTV cap usually binds, while on low-yield, long-lease assets the cover test does.
You can read more about how we place these cases on our commercial mortgages page. And if the property needs work before it can be let, or you are buying land alongside it, our guide to development finance explained covers the funding routes that sit upstream of a commercial term loan.