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Commercial mortgage & DSCR calculator
Estimate the mortgage payment on a commercial property and test it against the income: annual debt service, debt service coverage ratio (DSCR), debt yield, cash-on-cash return, the balance at the end of the term and the largest loan a target DSCR supports. Choose semi-annual or monthly compounding. Amounts in CAD; nothing leaves your browser.
Results
- Loan amount
- $4,500,000
- Equity (down payment)
- $3,000,000
- Monthly payment
- $27,467.62
- Annual debt service
- $329,611
- DSCR
- 1.25×
- Cash flow after debt service
- $82,889
- Cash-on-cash return
- 2.76%
- Debt yield
- 9.17%
- Balance at end of term
- $4,013,438
- Max loan at 1.25× DSCR
- $4,505,305
All amounts in Canadian dollars. Calculated in your browser; nothing is sent or saved.
How it’s calculated
- DSCR
DSCR = NOI ÷ annual debt service - Payment
Monthly payment = loan × i ÷ (1 − (1 + i)^−n), n = amortization in months - Semi-annual compounding
i = (1 + rate ÷ 2)^(1/6) − 1; monthly compounding: i = rate ÷ 12 - Debt yield
Debt yield = NOI ÷ loan amount × 100
Worked example (illustrative numbers)
- A property priced at $7,500,000 with an NOI of $412,500 is financed at 60% loan-to-value: a $4,500,000 loan and $3,000,000 of equity.
- At 5.50% compounded semi-annually over a 25-year amortization, the monthly payment is about $27,467.62, so annual debt service is about $329,611.
- DSCR = 412,500 ÷ 329,611 ≈ 1.25×. Cash flow after debt service ≈ $82,889, a cash-on-cash return of about 2.76% on the equity. Debt yield = 412,500 ÷ 4,500,000 ≈ 9.17%.
- After a 5-year term the balance still owing is about $4,013,438. With monthly compounding at the same quoted rate, the payment rises to about $27,633.94 and the DSCR falls to about 1.24×.
Illustrative figures only; 5.50% is not a quoted or market interest rate, and lenders set their own terms.
What DSCR means to a buyer and a lender
The debt service coverage ratio compares a property's net operating income with the mortgage payments it has to carry. A DSCR of 1.25× means the NOI is 25% more than the annual principal and interest; at 1.00× the property only just covers its debt. Lenders usually size a commercial loan by the lower of a loan-to-value limit and a minimum DSCR, and the minimum is set out in the term sheet or commitment letter. This calculator lets you test any target rather than assuming one.
Debt yield (NOI as a percentage of the loan) is a second sizing test some lenders use because it doesn't depend on the interest rate or amortization. Cash-on-cash return is the buyer's view: cash flow after debt service divided by the equity put in.
Semi-annual or monthly compounding
Canadian fixed-rate mortgages are commonly quoted with interest compounded semi-annually, and the federal Interest Act requires a blended-payment mortgage to state its rate calculated yearly or half-yearly, not in advance. Many commercial and variable-rate loans compound monthly instead. The difference is small but real: at the same quoted rate, monthly compounding produces a slightly higher payment. Use the basis in the lender's commitment letter.
The calculator assumes level monthly payments that fully repay the loan over the amortization. It does not model interest-only periods, lender fees, rate holds, prepayment penalties or insured multi-family programs; check the actual loan documents for those.
Financing in an offering memorandum
Buyers ask about financing early: whether an existing mortgage can be assumed, what a new loan might look like, and how the income covers it. If you include financing assumptions in an offering, label them as illustrative, state the rate basis, amortization and loan-to-value used, and keep the NOI consistent with the operating statement. OfferingStack's offering memorandum has a Financing Assumptions page that calculates debt service, DSCR, debt yield, equity and yearly balances from the loan inputs you enter, with monthly or semi-annual compounding.
Estimates for marketing and screening only. This is not an appraisal, a valuation opinion, a loan offer, or financial, legal or tax advice.
Questions
How do you calculate DSCR?
Divide the property's annual net operating income by its annual debt service (principal and interest). An NOI of $412,500 against $329,611 of annual payments is a DSCR of about 1.25×.
What DSCR do lenders require?
It varies by lender, property type, tenant quality and market conditions, and it is stated in the lender's term sheet. This calculator doesn't assume a market figure; enter the target you want to test and it shows the largest loan that target supports.
Are Canadian mortgages compounded semi-annually?
Fixed-rate mortgages in Canada are commonly quoted with semi-annual compounding, and the Interest Act requires blended-payment mortgages to state the rate calculated yearly or half-yearly. Many commercial and variable-rate loans compound monthly. Check the commitment letter and pick the matching option.
What is debt yield?
Debt yield is the NOI divided by the loan amount, as a percentage. A $412,500 NOI on a $4,500,000 loan is a 9.17% debt yield. Unlike DSCR it doesn't change with the interest rate or amortization.
Is my data saved?
No. The calculation runs in your browser and nothing you type is sent to OfferingStack.
Related
Put the numbers in a finished offering memorandum.
Upload your fact sheet or rent roll, add the NOI and price, and review a watermarked preview of the financial and pricing pages before you buy anything.