How to Use the Commercial Mortgage Calculator
- Loan amount. Enter what you need to borrow, not the property price. If you know your deposit, the loan is the price minus your deposit.
- Interest rate. Use a lender quote if you have one. Planning ahead, most commercial mortgage rates sit a few points above the Bank of England base rate of 3.75%, so 5.5% to 9% covers the realistic range for a healthy business.
- Mortgage term. Commercial mortgages usually run from 5 to 25 years. A longer term lowers the monthly payment but adds a great deal to the total interest. The term comparison panel shows that trade-off as you change the figures.
- Repayment structure. Capital and interest clears the debt by the end of the term. Interest-only keeps the monthly payment lower but leaves the full loan outstanding to repay or refinance at the end.
- Arrangement fee. Add it as a percentage if your lender has quoted one, typically 1% to 2%. It lifts your total cost but does not change the monthly repayment.
Read the three result figures together, not just the monthly one. The monthly repayment is what has to fit your cash flow in a quiet quarter, not only a strong month. Total interest is what the borrowing costs on top of the loan. Total repayable is capital, interest, and any fee combined, and it is the figure to compare offers on: a lower monthly repayment can cost far more overall if the term is longer or the rate is higher.
Commercial Mortgage Repayment Formula
For a capital and interest commercial mortgage, the monthly repayment follows the standard amortization formula. The calculator uses this exact formula, so you can check any figure by hand.
For example, on a £500,000 commercial mortgage at 6.5% over 20 years: r = 6.5% ÷ 12 = 0.005417, n = 240, so the monthly repayment works out at £3,728. Early in the term most of each payment covers interest and only a thin slice reduces the balance; as the balance falls, more goes to capital. On a 20 or 25 year term that early period is long, which is why total interest climbs so steeply with the term.
For an interest-only commercial mortgage, the monthly payment is simply the loan multiplied by the monthly rate (P × r). The balance never falls, so the full amount is still owed at the end.
How Much Deposit Do You Need? Loan-to-Value Explained
Your deposit decides two things at once: whether a lender says yes, and what rate you pay if it does. Loan-to-value, or LTV, is the loan as a percentage of the property value. Most lenders cap owner-occupier deals at 70% to 75% LTV and investment property nearer 65% to 70%, so you are usually looking at a deposit of 25% to 35% of the price.
| Loan-to-value | Loan amount | Deposit required | Monthly repayment |
|---|---|---|---|
| 65% | £406,250 | £218,750 | £3,029 |
| 70% | £437,500 | £187,500 | £3,262 |
| 75% | £468,750 | £156,250 | £3,495 |
The figures above are for a £625,000 property at 6.5% over 20 years. A bigger deposit does more than shrink the loan: because it lowers the lender’s risk, it usually earns a sharper rate as well, so the saving compounds. When you are weighing how much cash to commit, run each deposit level through the calculator and look at the total repayable, not just the monthly figure.
Interest-Only vs Capital Repayment Commercial Mortgages
The choice between interest-only and capital repayment changes your monthly cost sharply and your total risk even more. On a £500,000 mortgage at 6.5% over 20 years, capital and interest costs about £3,728 a month and clears the debt. Interest-only costs about £2,708 a month, but the full £500,000 is still owed at the end of the term.
| Factor | Capital and interest | Interest only |
|---|---|---|
| Monthly cost (£500k at 6.5%) | Higher, around £3,728 | Lower, around £2,708 |
| Balance at end of term | £0, the loan is cleared | Full £500,000 still owed |
| Typical use | Owner-occupiers building equity | Investors relying on rent or resale |
| Main risk | Higher monthly commitment | Repaying or refinancing the balance later |
Interest-only is common on investment mortgages, where the rent covers the interest and the plan is to sell or refinance at the end. It frees up monthly cash but leaves a large debt standing that you must have a credible way to clear. Capital repayment costs more each month, but it is the option that leaves your business owning the building outright, which for an owner-occupier is usually the point.
Can Your Business Afford the Mortgage?
Knowing the monthly cost is the easy part. Whether your business can carry it through a downturn, a void period, or a rate rise is the question that matters. Work through this before you commit, because a comfortable calculator result is not the same as a comfortable decision.
- Does your trading profit, or the rent on an investment property, cover the repayment by at least 1.25 to 1.5 times, the cover most lenders want to see?
- Could you still meet the payment if income dropped for a quarter, or a tenant left and the property sat empty for a few months?
- If your rate is variable, have you tested the repayment at 1 or 2 percentage points higher than today’s rate?
- Have you budgeted for the deposit plus arrangement, valuation, and legal fees, which together can run to several percent of the price?
- On interest-only, do you have a credible plan to repay or refinance the full balance at the end of the term?
If you cannot answer yes to the income-cover and downturn questions, an affordable monthly figure does not make the mortgage the right move. For a fuller income-cover assessment, our commercial mortgage affordability calculator works through the debt service cover ratio lenders actually apply.
Frequently Asked Questions
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How do I calculate commercial mortgage repayments?
Use the calculator at the top of this page. Enter the loan amount, annual interest rate, and term, and choose capital and interest or interest-only. It applies the standard amortization formula and returns an estimated monthly repayment, total interest, and total repayable in seconds. To check by hand, the formula is monthly repayment = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the loan, r is the monthly rate, and n is the number of monthly payments.
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What interest rate should I use?
Use your lender quote if you have one. Planning ahead, most commercial mortgage rates sit a few points above the Bank of England base rate of 3.75%, so testing a range of 5.5% to 9% covers most healthy deals. A strong business with a low loan-to-value sits at the lower end; investment property, specialist premises, or a higher loan-to-value pushes toward the top.
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How much deposit do I need?
Most lenders cap owner-occupier mortgages at 70% to 75% loan-to-value and investment property nearer 65% to 70%, so you usually need a deposit of 25% to 35% of the property value. A larger deposit lowers the lender’s risk and often earns a sharper rate, so the saving compounds. On a £625,000 property, a 65% loan-to-value means a £218,750 deposit; at 75% it falls to £156,250.
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Should I choose interest-only or capital repayment?
Capital and interest costs more each month but clears the debt, leaving your business owning the building. Interest-only lowers the monthly payment but leaves the full loan outstanding to repay or refinance at the end. Owner-occupiers building equity usually take capital repayment; investors relying on rent or a future sale often use interest-only. On a £500,000 mortgage at 6.5% over 20 years, capital repayment is around £3,728 a month against roughly £2,708 for interest-only, plus the £500,000 still owed.
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Are commercial mortgage rates fixed or variable?
Both are available. Many commercial mortgages track the Bank of England base rate plus a margin, so your payment moves when the base rate moves. Fixed rates give certainty for a set period, usually at a slightly higher starting rate. The calculator assumes a single rate for the whole term, so on a variable deal, test the repayment at a rate 1 or 2 points higher to see how a rise would feel.
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Does the calculator include fees?
It includes an arrangement fee field, which you can set as a percentage of the loan, typically 1% to 2%. That fee is added to your total cost but does not change the monthly repayment. Valuation, legal, and broker fees are not captured, so add any known amounts to your total repayable when comparing offers.
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How we built and checked this calculator
We built this tool around the standard amortization formula shown above, and we cross-checked every figure by hand against that formula before publishing. The rate bands and loan-to-value ranges we suggest reflect the patterns we track across UK commercial lenders and the Bank of England base rate of 3.75%, not any single lender’s pricing, which is why we present them as ranges to test rather than rates to expect. We have not arranged your specific mortgage, so we make no claim about the rate you will be offered; the tool models cost, and the lender’s own illustration is the figure that counts once you have an offer.