Commercial DSCR and maximum loan calculator
Short answer
Commercial lenders size a loan from the property's income, not yours. The maximum loan is the amount whose payments equal net operating income divided by the lender's target DSCR, then capped by loan-to-value and debt yield.
Size your commercial loan
All rents and other income, a year
Tax, insurance, utilities, repairs, management, reserves. Not mortgage payments.
Often 1.20 to 1.30
Lenders often stress above the contract rate
0 to skip the LTV test
NOI ÷ loan. 0 to skip.
Maximum loan proceeds
$2,520,066
Limited by dscr · NOI $253,200 ÷ 1.25× = $202,560 of debt service a year
By DSCR
$2,520,066
Binding limit
By loan-to-value
$3,000,000
By debt yield
$3,165,000
How much can you borrow at other DSCRs and rates?
Loan supported by NOI alone (before LTV and debt-yield limits). Darker cells support more debt.
| DSCR \ rate | 5.50% | 6.00% | 6.50% | 7.00% | 7.50% |
|---|---|---|---|---|---|
| 1.10× | $3,142,544 | $2,998,065 | $2,863,711 | $2,738,633 | $2,622,061 |
| 1.20× | $2,880,665 | $2,748,226 | $2,625,069 | $2,510,414 | $2,403,556 |
| 1.25× | $2,765,438 | $2,638,297 | $2,520,066 | $2,409,997 | $2,307,414 |
| 1.30× | $2,659,075 | $2,536,824 | $2,423,140 | $2,317,305 | $2,218,667 |
| 1.40× | $2,469,141 | $2,355,622 | $2,250,059 | $2,151,783 | $2,060,191 |
How much can a property with $250,000 of NOI borrow?
At a 1.25× DSCR, $250,000 of NOI can carry $200,000 of debt service a year, or $16,666.67 a month.
At a 6.5% underwriting rate over 25 years that supports $2,488,217. A 75% loan-to-value limit on a $4 million value would allow $3,000,000, so DSCR is the binding limit and the maximum loan is $2,488,217.
How do I size a commercial loan from DSCR?
- 1
Calculate NOI
Take gross potential income, subtract vacancy and credit loss, then subtract operating expenses. Do not subtract mortgage payments.
- 2
Divide by the target DSCR
NOI divided by the lender's DSCR (for example 1.25) is the most annual debt service the property can carry.
- 3
Convert the payment to a loan
Find the loan that this monthly payment repays over the amortization at the lender's underwriting rate.
- 4
Apply the other limits
Check the loan against the maximum loan-to-value and any minimum debt yield. The smallest result is the loan you can get.
Frequently asked questions
What is DSCR in commercial real estate?
The debt service coverage ratio is net operating income divided by annual mortgage payments. A DSCR of 1.25 means the property earns 25% more than it needs to pay the mortgage.
What DSCR do Canadian banks require?
Conventional commercial lenders usually want 1.20 to 1.30, tested at an underwriting rate that is often above the contract rate. CMHC-insured multi-unit loans can accept lower ratios.
What is debt yield?
Debt yield is NOI divided by the loan amount. It ignores the interest rate, so lenders use it as a floor. In the example the debt yield is 10.05%.
Where do these numbers come from?
Formulas follow standard commercial underwriting. Rates and limits are your inputs; lenders set their own terms. The Bank of Canada rate is shown for context.