Commercial Mortgage Calculator for Investment Mortgages

Commercial Mortgage calculator

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*Please note our commercial mortgage calculator are based around Building Society charges not Bank Interest charges, see Notes below.

Notes:

Commercial Mortgage Interest Rates

Business and Commercial Interest rates are often not what they appear at first sight. A headline rate of 6% p.a. may mean just that, or it may mean a true rate of 6 ½ % or more depending on the commercial lender and the term of the loan. How does this arise?

Bank commercial interest charges

Banks calculate commercial interest on the balance outstanding at any given time at a monthly interest rate that compounds up to the declared annual rate. Thus 6% p.a. is equivalent not to 0.5% per month but to 0.487% per month. This method delivers a true cost of money equivalent to the headline rate of 6%.

Building Societies commercial interest charges

Most building societies take the simpler (and more profitable for them) method of saying that 6% p.a. is equivalent to 0.5% per month. This is equivalent to 6.17% as a true annual rate of interest. However some building societies adopt a calculation method on repayment mortgages that is even more disadvantageous for the borrower in that they only adjust the capital outstanding on the loan on the anniversary of the loan so that interest continues to be paid by the borrower on money that has been repaid during the course of the year! The effect of this on a 15 year loan at 6% nominal rate is to push up the true cost over the life of the loan to 6.44% - and indeed in the last year of the loan the cost of the borrowing is 11.46%! The impact of these different methodologies on a 15 year mortgage for £100,000 at 6% is shown by the repayments that would be required: