The formulas
- Maximum debt service = NOI / minimum DSCR
- Loan by DSCR = PV of (maximum debt service / 12) at rate / 12 over amortization x 12 months
- Loan by LTV = value x LTV
- Maximum loan = lower of the two
How it works
Lenders size income-property and many business loans backward from cash flow. They divide net operating income by the minimum coverage ratio to get the most debt service the asset can carry, then convert that payment into a loan amount at the quoted rate and amortization.
A second test caps the loan at a share of value. Whichever test gives the smaller loan binds. Longer amortization or a lower rate raises the DSCR-based amount. Leave value and LTV blank to see the DSCR test alone.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
What DSCR do lenders ask for?
It depends on the lender and asset type. Enter the minimum in your term sheet.
Is the payment monthly?
Yes. The tool assumes level monthly payments of principal and interest.
What about interest-only periods?
Lenders size on the amortizing payment in most cases. Check the term sheet for the sizing payment.
Formulas on this page are the standard definitions.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.