What is a commercial mortgage?

A commercial mortgage helps you finance investment properties—like apartments, offices, retail spaces, or industrial buildings. Whether you’re buying, renovating, or improving a property, these loans are designed to support your vision.

How do commercial mortgages work?

Every property and investor is unique. Lenders look at your property and your business to see if they can offer the right financing. The process is straightforward: apply, go through underwriting, and—if approved—secure your loan. The details and requirements are tailored for investment properties.

How are commercial and residential mortgages different?

While both help you buy property, commercial loans are built for businesses and investment properties. They often have larger amounts, different features, and unique repayment schedules. Instead of just looking at your income, lenders focus on your property’s revenue and business health. Terms like DSCR, cap rate, and NOI matter a lot. Most commercial loans are for companies, not individuals.

What types of interest rates are available?

You can choose from fixed, variable, or hybrid rates. Fixed rates stay the same for your loan’s life. Variable rates change with the market, often once a year. Some government-backed loans may offer lower rates. When you repay, the interest is calculated over the full amortization period, not just the loan term.

Is there a commercial loan calculator I can use?

Absolutely. Calculating payments for commercial loans can be complex, but our Commercial Loan Calculator and the Investopedia Commercial Loan Calculator make it easy. They’re designed for business properties and consider all the factors that matter. (Avoid using residential calculators—they miss key details.)

What terms should I know before I apply?

• Repayment Schedule: Commercial loans often have a shorter term but a longer amortization, which can mean a large final payment (a “balloon payment”).
• Loan-to-Value (LTV): This ratio compares your loan amount to your property’s value. Most programs allow up to 80%. Learn more.
• Debt-Service Coverage Ratio (DSCR): This measures if your property’s income can cover the loan payments. Learn more.
• Prepayment Penalty: Some loans charge a fee if you pay off your loan early. This can be a fixed fee, a step-down, or based on interest lost.
• Cap Rate: The expected annual return on your property. Learn more.
• Net Operating Income (NOI): Your property’s income after expenses. Learn more.
• Loan-to-Cost (LTC): For construction, this compares your loan to the total project cost. Learn more.

What documents will I need?

Be ready with details about your property (value, revenue, costs, tenants) and your business (ownership, portfolio, financials). Lenders will want to see that your property and business are strong. You’ll also need to calculate key ratios like LTV and DSCR—our calculator can help.