Commercial Property Loan Repayment Calculator

How to use this calculator

Work through the fields from top to bottom. The results update as you type.

1. Purchase price. Enter the price of the property, including any GST you will pay.
2. Deposit. Enter it in dollars or as a percentage. The calculator shows the loan amount and the loan-to-value ratio (LVR), which is the loan as a share of the price.
3. Interest rate. Use a rate you have been quoted, or test a few. The rate shown when the page loads is an example only.
4. Loan term. Any whole number of years from 1 to 40.
5. Repayment type. Choose principal and interest, interest only for the whole term, or interest only to start and then principal and interest.
6. Frequency. Monthly, fortnightly or weekly.

You will see the estimated repayment, total interest, a balance chart and a year-by-year table.

What are repayments on a $1m or $2m commercial property?

The table below shows estimated repayments on a $1,000,000 loan and a $2,000,000 loan. It assumes a 25-year term, monthly repayments, a rate that stays the same for the whole term, and no fees. The 7.00% p.a. rate is an example only, not a market rate or an offer.

On the $1,000,000 loan, interest-only repayments are $1,234.46 a month lower than principal and interest, but the full $1,000,000 is still owing at the end of the interest-only period.

If the rate were one percentage point higher (8.00%), principal and interest repayments would rise by $650.37 a month on $1,000,000 and $1,300.74 a month on $2,000,000.

Over 25 years at 7.00%, principal and interest on $1,000,000 adds up to about $1.12 million in interest. Taking five years of interest only first, then principal and interest over the remaining 20 years, lifts the later repayment to $7,752.99 a month and total interest to about $1.21 million.

Buying a $1,000,000 property with a 30% deposit means a $700,000 loan. On the same assumptions, that is $4,947.45 a month principal and interest.

Interest-only vs principal and interest

With principal and interest, each repayment covers the interest charged plus part of the loan. The balance falls over the term and reaches zero at the end.

With interest only, you pay just the interest for a set period. Repayments are lower, but the balance does not fall. When the interest-only period ends, the loan usually moves to principal and interest over the years that are left, so repayments step up. You can see this in the calculator by choosing "Interest only to start, then principal and interest".

Interest only can help cash flow, for example while a property is being leased up or a business is settling into new premises. It also means paying more interest over the life of the loan. Whether interest only is available, and for how long, depends on the lender and your circumstances. It is worth comparing both options before you decide.

What affects your rate and repayments?

Lenders price commercial property loans on risk. The main factors are:

• LVR. A larger deposit means a lower LVR and less risk for the lender. Above an 80% LVR, the calculator notes that some lenders may ask for additional security or charge a higher rate.
• Property type. Lenders look at how easily the property could be leased or sold. Offices, shops, industrial sites and specialised premises can be assessed differently.
• Tenant and lease. For an investment property, lenders consider who the tenant is, how long is left on the lease and whether the rent comfortably covers the interest.
• Full doc or low doc. A full doc loan is assessed on financial statements and tax returns. Some lenders offer loans assessed on fewer documents, or mainly on the lease. These can come with different pricing and lower borrowing limits.
• Loan size and term. The amount you borrow and the term affect the rate offered and the repayment.
• Fixed or variable. A fixed rate gives certainty for a set period, but some lenders charge break costs if you repay or refinance early.

Your own financial position matters too: your income, other debts and the strength of the business or entity that is borrowing. Two borrowers buying the same property can be offered different rates, so test a range of rates in the calculator.

How much can you borrow against commercial property?

There is no single answer. Most lenders apply two tests.

Security. The lender sets a maximum LVR for the property. That limit varies by lender, property type, location, loan size and how the loan is assessed, so the deposit you need varies too.

Serviceability. The lender checks that you can meet the repayments. For premises your business will occupy, that usually means the business's trading income. For an investment property, lenders look at the rent and commonly test how many times it covers the interest (an interest cover ratio).

Lenders may also look at the borrowing entity (company, trust or individual), guarantees and any other property you can offer as security. You will also need funds for stamp duty and other buying costs on top of the deposit.

This calculator shows repayments. It does not test how much a lender will lend. A broker can check your figures against current lender policy before you commit to a purchase.

Other costs to budget for

The deposit is only part of the cash you need. When you buy a commercial property, also budget for:

• transfer (stamp) duty, charged on the GST-inclusive price
• title transfer and mortgage registration fees
• legal and conveyancing fees
• valuation, building and pest inspections
• lender application or establishment fees
• ongoing costs once you own it, such as insurance, council rates and land tax

It also makes sense to keep a buffer in case rates rise. The example above shows what one percentage point can add.

Our buying costs calculator for Queensland and New South Wales estimates duty and government fees, and lets you add your own quotes for the rest.

Talk to a commercial finance broker

A calculator gives you a starting point. Our Brisbane and Sydney brokers can work through the actual numbers with you, including the deposit, loan structure and which lenders suit the property and your situation. It helps to have the property details, the price, your deposit and whether you will occupy or lease the property.

Call 0451 973 662 or enquire online.