Commercial Mortgage Calculator: For Investors & Small Business Owners (Debt Service Coverage Ratio Focus)

Commercial loans work very differently from home loans.

Banks usually don’t care much about:

• Your personal salary
• Your lifestyle expenses

They care about one thing:

Can the property or business pay for the loan?

That’s why a commercial mortgage calculator must focus on DSCR — not personal debt-to-income.

This guide explains DSCR in simple words and shows how a proper calculator should work in 2026.

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What Makes a Loan “Commercial”?

A commercial mortgage is used for:

• Rental properties (5+ units)
• Office buildings
• Retail spaces
• Warehouses
• Mixed-use buildings
• Owner-used business property

Approval is based mainly on income from the property or business, not your paycheck.

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What Is DSCR? (Plain English)

DSCR (Debt Service Coverage Ratio) shows how easily income covers the loan payment.

Simple formula

DSCR = Net Operating Income ÷ Annual Loan Payment

That’s it.

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Why DSCR Matters More Than Credit Score

For commercial lenders:

• DSCR shows cash strength
• Credit score is secondary
• Income stability matters more than income size

Most lenders want:

• DSCR of 1.20 – 1.30 or higher

This gives them a safety buffer.

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Step 1: Calculate Net Operating Income (NOI)

NOI is income after expenses, but before the loan payment.

Rental property example

• Annual rent: $180,000
• Operating costs (taxes, insurance, repairs, management): $60,000

NOI: $120,000

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Business property example

• Annual business revenue: $500,000
• Operating costs (not including loan): $410,000

NOI: $90,000

This is the number the bank uses.

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Step 2: Estimate the Annual Loan Payment

Your commercial mortgage calculator should ask for:

• Loan amount
• Interest rate
• Loan term (often 20–25 years, sometimes shorter)

Example

• Loan amount: $1,000,000
• Rate: 7.25%
• Term: 25 years

Annual loan payment:

~$87,600

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Step 3: Calculate DSCR

Using the rental example:

DSCR = $120,000 ÷ $87,600 = 1.37

✅ Strong approval territory.

Using the business example:

DSCR = $90,000 ÷ $87,600 = 1.03

⚠️ Risky. Likely rejected or adjusted.

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What Lenders Do If DSCR Is Too Low

If DSCR is under the limit, lenders may:

• Reduce the loan amount
• Ask for a higher down payment
• Increase the interest rate
• Shorten the loan term

A good calculator should show how much loan you actually qualify for, not just payments.

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Why Personal DTI Doesn’t Matter Much Here

Unlike home loans:

• Personal rent or groceries don’t matter
• Personal salary is less important
• The deal must stand on its own

That’s why consumer mortgage calculators fail for commercial deals.

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What a Proper Commercial Mortgage Calculator Should Include

A real commercial mortgage calculator must:

• Accept rental income or business revenue
• Calculate NOI automatically
• Show DSCR clearly
• Allow loan amount testing
• Show “approve / borderline / reject” ranges

Without DSCR, the calculator is incomplete.

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Typical DSCR Targets in 2026

Property Type	Common DSCR Target
Multifamily	1.20 – 1.25
Office / Retail	1.25 – 1.35
Industrial	1.20 – 1.30
Owner-occupied	1.15 – 1.25

These vary by lender, but the logic stays the same.

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Smart Ways Investors Use a DSCR Calculator

Use it to:

• Test rent assumptions
• See how rate changes affect approval
• Decide how much down payment is needed
• Compare deals quickly
• Avoid wasting time on weak deals

This saves months of back-and-forth.

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Common Mistakes to Avoid

• Using a home loan calculator
• Forgetting vacancy allowance
• Underestimating repairs
• Ignoring reserves

Commercial lenders see through optimistic numbers fast.

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Final Thoughts

Commercial loans are not about feelings or salaries.

They are about cash flow.

A commercial mortgage calculator with DSCR focus:

• Shows if the deal works
• Shows where it breaks
• Helps you fix problems early

If the numbers work, approval follows.
If they don’t, no pitch will save it.

That’s the reality of commercial lending.

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Disclaimer: Commercial lending rules vary by lender, property type, and market. This content is for education only. Always confirm loan terms with a qualified commercial lender.