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Maximum commercial loan, DSCR and LTV

See how income coverage and loan-to-value each cap your loan, and which one binds. Then talk to us about your real options.

Your numbers

Sized on debt service coverage and loan-to-value, with Canadian semi-annual compounding.

A rate to estimate with. We will confirm your actual options.
Maximum loan
$0
DSCR-limited loan$0
LTV-limited loan$0
Binding constraint--
Implied DSCR--
Implied LTV--
Talk to us

For illustration only and not an offer of financing or a rate quote. The binding constraint is usually whichever is lower, the DSCR-limited loan or the LTV-limited loan, and lenders also apply debt yield and asset-specific tests. Estimates use Canadian semi-annual compounding and assume a fixed rate held for the full amortization shown. Speak with us for figures specific to you. TMG HarbourTown Mortgage Inc., Licence #3000145.

What these numbers mean

Plain-language definitions and the typical ranges, so you can play with the inputs with confidence.

Net operating income (NOI)
The property's income after operating costs (vacancy, taxes, insurance, management, repairs), before financing. It is the number lenders size the loan on, not gross rent.
Typical: lenders use their own underwritten NOI, often below the seller's pro forma
Property value or price
The lesser of purchase price and appraised value sets the loan-to-value cap. On a purchase, lenders generally use the lower of the two.
Typical: appraisal can come in below the contract price on commercial assets
Interest rate
The annual rate used to size the loan. Commercial rates move with the lender, term, and asset, so this is an estimate to model with, not a quote.
Typical: commercial rates run above comparable residential rates
Amortization
The repayment period the payment is spread over. A longer amortization lowers the payment and can support a larger DSCR-limited loan.
Typical: 25 years on conventional commercial, longer under CMHC
Minimum DSCR (debt service coverage)
NOI divided by annual debt service. The minimum is the cushion a lender wants between income and the loan payment. A higher minimum sizes the loan smaller.
Typical: 1.20 to 1.30 conventional; around 1.10 under CMHC MLI Select
Maximum LTV (loan-to-value)
The largest loan a lender will advance against value, as a percentage. It is a separate cap from the income test.
Typical: up to 75 percent conventional commercial; up to 85 percent CMHC standard
Binding constraint
Your real maximum is the lower of the DSCR-limited loan and the LTV-limited loan. Whichever comes in lower is the one that binds, and it is often misjudged because people anchor on value alone. Lenders also apply a debt yield floor and asset-specific tests.
Typical: on lower-yielding assets the DSCR test binds before the LTV cap
These are general ranges, not your numbers. The right figure depends on your situation, the property, and the lender. Talk to us and we will pin it down.

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