Commercial Loan Sizing Calculator
Enter NOI, property value, and lender constraints to estimate the largest commercial mortgage supported by DSCR, LTV, and debt yield. The result identifies the limiting test and shows the equity, payment, and balloon balance implied by that loan amount.
Maximum supportable loan$1,125,000.00
- Binding constraint
- LTV
- DSCR loan ceiling
- $1,131,895.23
- LTV loan ceiling
- $1,125,000.00
- Debt-yield loan ceiling
- $1,333,333.33
- Required equity
- $375,000.00
- Monthly principal and interest
- $7,951.27
- Annual debt service
- $95,415.19
- DSCR at maximum loan
- 1.26
- Balloon balance at maturity
- $884,625.71
Assumes a fixed underwriting rate, monthly principal-and-interest payments, and no interest-only period.
The final loan is the smallest applicable DSCR, LTV, and debt-yield ceiling.
Resulting LTV is 75.00%; resulting debt yield is 10.67%.
How to use this calculator
- Enter stabilized annual NOI and the property value or purchase price the lender will size against.
- Enter the minimum DSCR, maximum LTV, and minimum debt yield used in underwriting.
- Enter the sizing interest rate, amortization period, and loan term.
- Review the smallest loan ceiling, the binding constraint, required equity, scheduled payment, and balloon balance.
How the maximum loan is calculated
Commercial loan sizing usually starts with more than one limit. A property may support one amount from income coverage, another from collateral value, and another from debt yield. This calculator sizes all three tests and uses the lowest applicable ceiling as the maximum supportable loan.
Let N be annual NOI, V be property value, D be minimum DSCR, l be maximum LTV as a decimal, y be minimum debt yield as a decimal, i be the annual interest rate, A be amortization years, and T be loan term years. The monthly rate is r = i / 12, the amortization payment count is n = 12A, and the maturity payment count is k = min(12T, n).
The DSCR test first finds the monthly debt service the income can carry:
Q = N / (12D)
If the rate is above zero, the DSCR loan ceiling is the present value of that payment stream:
L_DSCR = Q x [1 - (1 + r)^(-n)] / r
At a zero rate, it uses L_DSCR = Q x n. The LTV ceiling is L_LTV = V x l. If a debt-yield test applies, the debt-yield ceiling is L_DY = N / y; if the minimum debt yield is zero, that test is omitted. The final loan is min(L_DSCR, L_LTV, L_DY) after omitting debt yield when needed.
What moves the result most
NOI affects both the DSCR and debt-yield tests, so changes to stabilized income can move the answer sharply. A higher DSCR requirement, higher debt-yield requirement, or higher underwriting rate lowers proceeds. Property value affects only the LTV ceiling, but it often controls when the income can support more debt than the lender will advance against the collateral.
The amortization period changes the DSCR ceiling because a longer repayment schedule lowers the payment per dollar borrowed. The loan term does not change the initial maximum loan in this model; it changes the balloon balance due at maturity when the term is shorter than the amortization period.
What this calculator leaves out
This is an underwriting estimate, not a loan approval. It excludes closing costs, origination fees, reserves, interest-only periods, rate resets, subordinate debt, minimum or maximum lender loan sizes, and borrower credit or liquidity requirements. Lenders may also adjust NOI for vacancy, management fees, replacement reserves, tenant rollover, nonrecurring income, or property condition before they apply these tests.
Worked example
Suppose a property has $120,000 of annual NOI and a lender sizes against a $1,500,000 value. The lender requires at least 1.25x DSCR, no more than 75% LTV, at least 9% debt yield, a 7% sizing rate, 25-year amortization, and a 10-year loan term.
The DSCR test allows $8,000 of monthly debt service, which supports about $1,131,895.23 over 25 years at 7%. The LTV test allows $1,125,000, and the debt-yield test allows about $1,333,333.33. The smallest ceiling is the LTV amount, so the maximum supportable loan is $1,125,000 and required equity is $375,000.
At that loan amount, monthly principal and interest is about $7,951.27, annual debt service is about $95,415.19, DSCR is about 1.26x, and the balloon balance after 10 years is about $884,625.71.
Common questions
How do lenders calculate the maximum loan amount from DSCR?
They divide annual NOI by the required DSCR to find the maximum annual debt service. That annual amount is divided by 12 and converted to a loan amount using the underwriting interest rate and amortization period.
What is the difference between DSCR, LTV, and debt yield?
DSCR compares NOI with annual debt service, so it tests payment coverage. LTV compares loan amount with property value, so it tests collateral leverage. Debt yield compares NOI with loan amount, so it tests the lender income yield before interest rate or amortization assumptions.
Which commercial loan sizing constraint usually controls?
It depends on income, value, rates, and lender standards. LTV often controls on lower-leverage properties with strong income, while DSCR can control when rates are high or coverage standards are tight. Debt yield can control when a lender wants an income-based backstop that is independent of amortization.
Why does a higher underwriting interest rate reduce loan proceeds?
A higher rate increases the monthly payment required for each dollar borrowed. Because DSCR limits the payment the NOI can support, the same income converts into a smaller loan amount when the sizing rate rises.
Why is the loan term different from the amortization period?
The amortization period sets the payment schedule used to repay principal over time. The loan term sets the maturity date. If the term is shorter than the amortization period, the unpaid principal at maturity is the balloon balance.
What happens when the appraisal is below the purchase price?
Many lenders size LTV against the lower of purchase price and appraised value. If the appraisal is lower, the LTV ceiling falls, which can increase required equity even when DSCR and debt yield support the requested loan.