How much will your building borrow?
Lenders size commercial loans from the building's income and value, not your asking price. Enter what you know and see the maximum supported loan the way an underwriter computes it, conventional and CMHC insured side by side. Illustrative math, real method.
The short answer
A commercial lender sizes your loan twice, once from the income and once from the value, and lends the lower of the two. The income test is debt service coverage. The value test is loan to value.
| Test | What it measures | What usually binds |
|---|---|---|
| Debt service coverage | Net operating income divided by the annual mortgage payment | Binds on most income producing property in British Columbia, because values here are high relative to rents |
| Loan to value | Loan divided by the appraised value, not the purchase price | Binds when the income is strong but the property appraises light |
| Program limits | The maximum a specific lender or insurer will go to | Binds on insured files, where the ceiling is set by the program rather than by your numbers |
Current benchmark rates are on the rates page, which is refreshed monthly.
Your building
Optional, unlocks down payment and loan to value limits
Maximum supported loan
- Monthly payment
- $20,000
- Monthly payment
- $22,727
Planning an insured file? Estimate your MLI Select points. Testing a price against the income? Run the cap rate calculator. Building instead? Size a construction loan. See all calculators.
What DSCR a lender will want
The ratio is the lender's margin of safety, the cushion between what the building earns and what the mortgage costs. A higher required ratio means a smaller loan on the same income.
| Lender type | Typical minimum DSCR | Why |
|---|---|---|
| Banks: multifamily | 1.20 to 1.25 | The friendliest treatment of any conventional asset class, because lenders trust apartment income. |
| Banks: industrial | 1.20 to 1.30 | Coverage minimums vary by lender type and asset class, and industrial sits just above multifamily. |
| Banks: retail | 1.25 to 1.35 | Tenant quality carries more weight, so the required cushion widens. |
| Banks: office | 1.30 to 1.40 | The widest conventional cushion of the asset classes lenders band this way. |
| Credit unions and B lenders | 1.15 to 1.25 | A band that overlaps the banks at the top and sits below them at the bottom. |
| CMHC insured (MLI Select) | 1.10 | Sits below everything conventional. Combined with insured rates and long amortizations, it is the single biggest loan sizing lever in Canadian rental housing. |
| Private lenders | 1.05 to 1.15 | The thinnest cushion, priced accordingly. |
The full method, worked line by line, is in our guide to how DSCR sets your commercial loan amount.
A worked example
Take a property with 300,000 dollars of net operating income, the figure the calculator above starts with.
Conventional at 1.25 coverage (about 3.26 million dollars)
The conventional path uses the calculator's default assumption set: 1.25 debt service coverage, a 5.5 percent illustrative rate, a 25 year amortization and a 75 percent loan to value cap. On those inputs the calculator returns 3,256,865 dollars. The value half of that cap comes from the lender's own appraisal rather than from your purchase price, and how a commercial appraisal works explains how that number gets built.
CMHC insured at 1.10 coverage (about 5.42 million dollars)
The insured path uses 1.10 coverage, a 4.5 percent illustrative rate, a 50 year amortization and an 85 percent cap. On those inputs the calculator returns 5,419,129 dollars.
The same building supports roughly 2.16 million dollars more debt on the insured path. That gap is why the MLI Select conversation is worth having before you write an offer, not after.
Both assumption sets are illustrative. Real pricing depends on the file.
Why a lender's number comes in lower than yours
They underwrite actual income, not pro forma
Lenders size against signed leases and filed statements, not what the space could rent for. The rent roll you can prove is the rent roll that counts, and anything above it is your case to make, not their assumption.
They add back a vacancy allowance even when you are full
A full building today is not a full building for the whole term, so the underwriter applies a vacancy allowance regardless of current occupancy. It comes off the income before the loan is sized.
They add a management fee even when you manage it yourself
The lender underwrites the property as it would trade, not as you run it. If you manage it yourself, a management fee still goes into the expense line, because the next owner would pay one.
They deduct a structural reserve
The roof, the parking and the mechanical all come due eventually. Lenders deduct a reserve for that capital, which is one reason a building condition assessment shows up as a condition of approval.
Every one of those reduces net operating income, and since the loan is a multiple of that number, small deductions move the loan a long way.
Sizing questions we hear most.
What this does and doesn't tell you
This is the debt service and leverage math, the two constraints that size most commercial and multifamily loans. Real quotes also depend on the lender's underwritten NOI, asset class, borrower strength, and on insured files the CMHC premium (typically added to the loan) and program requirements. Treat the output as the shape of the answer, not a commitment. Value is the other half of the sizing, so if the appraisal comes in below the price the supported loan moves with it.
What sets the rest of the number
Sizing is one part of the file. These pages cover the tests that come next.
Have a file in mind?
Tell us the property, the timeline and how you plan to exit. We will tell you what is realistic.