Commercial Property Loan Calculator Australia
Turn an indicative facility into a lender-style repayment memo. Compare principal-and-interest with interest-only payments, calculate loan-to-value ratio, expose fees, and test debt service against the property’s annual net operating income.
Facility assumptions
What this commercial loan calculator measures
This calculator is designed for an Australian commercial property borrowing conversation, not for a standard owner-occupied home loan. It produces an indicative regular payment from the amount, annual rate, term, frequency and repayment structure you enter. It then adds the fee information separately, measures the proposed loan against the property value, and compares scheduled annual debt service with net operating income. Keeping those measures separate matters: a low scheduled payment can coexist with high entry costs, a large refinancing balance or insufficient property income.
The loan-to-value ratio, or LVR, is the requested loan divided by the property value. It does not predict a lender’s maximum LVR. Commercial lenders may apply their own valuation basis, property-type limits, lease requirements, tenant assessments and risk margins. A lender could use a value below the purchase price or require additional security. The calculator therefore reports the arithmetic LVR only. It does not label a proposal eligible, approved or suitably secured.
Principal and interest versus interest only
Principal-and-interest payments are calculated using a standard amortising-loan formula. Each regular payment contains interest and principal, so the modeled balance reaches zero at the end of the entered term if every payment is made as assumed and the rate does not change. Earlier payments contain more interest; later payments contain more principal. The displayed total interest is the sum of modeled payments less the original principal. Fees are not treated as interest and are shown in the first-year cost instead.
Interest-only mode calculates each payment as principal multiplied by the periodic rate. The principal does not reduce in this simplified model, so the end balance equals the original loan. Total interest is the sum of those interest payments across the term. Real commercial facilities may have an interest-only period followed by amortisation, periodic reviews, line fees based on the limit, default margins, redraw rules or a shorter facility expiry than the underlying amortisation profile. Model those terms in separate stages and rely on the contract for exact cash flows.
Reading the lender-style memo
The regular payment is the amount at the selected frequency. The annual scheduled debt service multiplies that payment by the number of payments per year. The first-year cash finance cost adds annual scheduled payments, ongoing annual fees and upfront fees. This is deliberately a cash-planning measure, not an accounting effective interest rate and not a tax deduction estimate. Timing, capitalisation and deductibility can differ, so an accountant should classify each amount.
The debt-service coverage ratio, abbreviated DSCR, divides entered annual net operating income by annual scheduled debt service. A result of 1.20 times means the entered income is 120% of scheduled payments, leaving a 20% arithmetic buffer before tax, capital expenditure and other commitments excluded from the income figure. Lenders define income, expenses and minimum coverage differently. Some use a stressed interest rate or principal-and-interest equivalent even when the facility is interest only. Treat this page’s DSCR as a transparent scenario measure, never as a lender’s credit decision.
The stressed payment uses the entered interest rate plus the stress margin. It is a sensitivity result, not a forecast. For interest-only borrowing it shows the higher interest payment; for amortising borrowing it recalculates the regular repayment at that higher rate over the same term. Consider further cases for lease expiry, incentive payments, repairs, land tax, insurance, management charges and periods without rent.
How to prepare reliable inputs
Start with a current written facility proposal and a valuation basis that matches the lender’s discussion. Enter only principal that will actually be drawn. If an establishment fee is capitalised into the loan, increase the loan amount and do not count the same fee twice. Put non-capitalised establishment, valuation, legal and broker costs in upfront fees. Put recurring facility or review fees in annual fees. Stamp duty, conveyancing, environmental reports and acquisition costs may be important to the total project budget even if they are not lender fees; maintain a separate acquisition-cost schedule for them.
Net operating income should begin with sustainable property revenue and subtract relevant operating outgoings before finance and income tax. Do not automatically use gross rent. Check who pays council rates, strata charges, insurance, maintenance, management, land tax and utilities under the leases. Allow for vacancy, rent-free incentives, unrecovered outgoings and known capital work. For an owner-occupied business property, a lender may assess broader business cash flow rather than an artificial rent figure, so obtain professional guidance on the appropriate servicing measure.
Commercial lending has different protections
Business and commercial borrowing can sit outside protections that consumers associate with regulated home lending. The legal position depends on purpose, borrower, product and circumstances. ASIC explains that it generally cannot help resolve disputes about commercial loans that are not regulated under the National Credit Act. That is a reason to obtain independent legal advice before signing guarantees, mortgages, general security agreements or covenants, especially when personal assets support a business facility.
Business.gov.au recommends preparing a business plan, financial statements, cash-flow forecast and details of security when applying for a business loan. A lender may also request tax returns, leases, tenancy schedules, trust or company documents, valuation reports and evidence of the borrower’s experience. This calculator supplies none of those assessments. Its role is narrower: it helps you find arithmetic pressure points and ask better questions about the written offer.
Scenario checklist before relying on a figure
| Scenario | Change to enter | Question it answers |
|---|---|---|
| Rate rise | Add two or more percentage points | Can rent or business cash flow absorb a repricing? |
| Vacancy | Reduce net operating income for lost rent and reletting costs | How quickly does coverage fall below one? |
| Lower valuation | Reduce property value while keeping debt unchanged | Could the LVR breach a proposed covenant? |
| Refinance | Select interest only and examine the end balance | What principal must be repaid or refinanced at expiry? |
| Fee comparison | Enter every quoted upfront and annual fee | Does the apparently lower rate still have the lower first-year cash cost? |
A sound decision also considers liquidity after settlement, capital expenditure, tenant concentration, lease duration, zoning, environmental risk, insurance availability and sale costs. Compare offers on consistent amounts, timing and assumptions. Ask each lender whether rates are fixed or variable, which fees can change, what reviews apply, how covenants are tested, whether early repayment costs apply, and what happens at facility expiry.
Frequently asked questions
Does this calculator show how much a commercial lender will approve?
No. It calculates scenarios from your inputs. Approval depends on lender policy, borrower strength, property type, valuation, leases, serviceability, security, guarantees and due diligence. The displayed LVR and DSCR are not approval thresholds.
Why can an interest-only payment look much lower?
It contains interest but no scheduled principal reduction. That improves near-term cash flow in the model, while leaving the entire entered loan balance due at the end. Refinancing or repayment risk therefore remains significant.
Are GST and tax deductions included?
No. The page does not calculate GST, income tax, depreciation or deductibility. Commercial property transactions and finance fees can have different tax treatment. Use a qualified tax adviser and written transaction documents.
What is a good DSCR?
There is no universal number. Lenders use different definitions, stress rates and minimums for different borrowers and assets. Use the result as a sensitivity indicator and ask the lender to explain its own calculation and covenant.
Should purchase costs be included in the loan amount?
Only include amounts that are actually financed into the drawn principal. Keep stamp duty, legal work, inspections and other acquisition costs in a broader project budget. Avoid counting a financed fee both in principal and in the upfront-fee field.
Can I compare fixed and variable commercial rates here?
You can run separate scenarios using each quoted rate and fee set. The calculator does not value break costs, rate caps, swaps or future variable-rate paths. Compare contractual terms and obtain advice for hedging products.