# Commercial Mortgage Calculator

Using this commercial mortgage calculator, you will quickly be able to calculate the likely interest rate on your new commercial mortgage loan and the likely size of the commercial loan that your commercial lender or SBA lender will make. First of all, let’s compute the likely interest rate on your new commercial loan.

If your new commercial mortgage loan will be a conventional loan, in other words, it will not be an SBA loan, then your new commercial mortgage will probably be written by a bank. Banks, in most cases, have the best rates for commercial loans of less than \$5 million.

The C-Loans Commercial Mortgage Calculator says that the interest rate on your new commercial mortgage loan will likely be 50 basis points (just a fancy way of saying one-half of one percent) higher than the prime residential mortgage rate. The prime residential mortgage rate is the best rate that a good borrower can get on a conforming 30-year, fixed-rate mortgage on his home.

In other words, let’s suppose that the banks in town are advertising that they will make 30-year, fixed-rate first mortgages on homes of less than \$417,000 for 3.70%. (Home loans larger than \$417,000 are considered non-conforming loans or jumbo’s, and they have higher rates.) So 3.70% plus 0.50% equals 4.30%. This is the likely interest rate that you would pay for a conventional commercial first mortgage loan of less than \$5 million on an office building, retail building, shopping center, or industrial building – according to our commercial mortgage calculator.

What if you are getting an SBA loan to purchase an industrial building for your small manufacturing company? The C-Loans Commercial Mortgage Calculator says that the interest rate on your SBA 7a loan (most common) will be 2.75% over the Wall Street Journal Prime Rate. You can find this Index easily by doing an internet search for, “What is the prime rate?”Therefore, if the prime rate today is 3.25%, then 2.75% over the prime rate is 6.0%.

But how large of a commercial loan will the bank make? If you are looking for a conventional commercial mortgage, the C-Loans Commercial Mortgage Calculator says that banks will finance office buildings, retail buildings, strip centers, shopping centers, warehouse, and industrial buildings up to 75% loan-to-value. In other words, if your office building is worth \$500,000, then our commercial mortgage calculator suggests that you should be able to get a loan as large as \$375,000 (75% of \$500,000).

Commercial lenders are not as keen on hotels, motels, restaurants, bars, and similar management-intensive commercial properties that we’ll call business properties. Our commercial mortgage calculator says that banks will only make commercial mortgages on business properties up to 60% to 70% loan-to-value.

If you are applying for an SBA loan to buy an office building for your existing casualty insurance brokerage business, the C-Loans Commercial Mortgage Calculator says that you should be able to get a new commercial mortgage loan of 90% of the purchase price.

If your business is less than three years old, however, the commercial mortgage calculator will limit your new SBA 7a loan to just 70% of the purchase price. In other words, you will have to put down 30% of the purchase price in cash.

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