August 2026 · Canadian Commercial Mortgages
By Nav Grewal, Principal Broker
DSCR: the number that sets your commercial loan amount.
Ask what a commercial building can borrow and most people reach for loan to value. Lenders don't. On income property, the loan is sized by debt service coverage first, and on most BC multifamily deals the DSCR limit bites before the LTV limit does. Understanding this one ratio explains most of the surprises borrowers hit between the offer and the commitment letter.
What DSCR actually is
Debt service coverage ratio is the building's net operating income divided by the annual mortgage payment. A DSCR of 1.25 means the property earns $1.25 for every $1.00 of debt service, a 25% cushion before the building stops covering its own mortgage. The lender sets the minimum cushion; the building's income then sets the maximum payment; and the payment, at a given rate and amortization, sets the maximum loan. Price doesn't enter the equation. That is why two buyers can pay the same price for the same building and walk away with very different mortgages.
What lenders require right now
Coverage minimums vary by lender type and asset class. As of mid 2026, typical bands in the Canadian market look like this:
| Lender type | Typical minimum DSCR |
|---|---|
| Banks: multifamily | 1.20 to 1.25 |
| Banks: industrial | 1.20 to 1.30 |
| Banks: retail | 1.25 to 1.35 |
| Banks: office | 1.30 to 1.40 |
| Credit unions and B lenders | 1.15 to 1.25 |
| CMHC insured (MLI Select) | 1.10 |
| Private lenders | 1.05 to 1.15 |
Two things stand out. Multifamily gets the friendliest treatment of any conventional asset class, lenders trust apartment income. And the insured programs sit below everything conventional: MLI Select underwrites to 1.10, which is not a small technicality. Combined with insured rates and long amortizations, it is the single biggest loan sizing lever in Canadian rental housing.
The same building, three loan sizes
Take a BC rental building producing $300,000 of net operating income. Illustrative rates, real math:
Bank at 1.25 coverage.
5.50% rate, 25 year amortization. Maximum annual debt service $240,000. Supported loan: roughly $3.26 million.
Bank at 1.20 coverage.
Same rate and amortization, thinner cushion. Supported loan: roughly $3.39 million.
MLI Select at 1.10 coverage.
4.50% insured rate, 50 year amortization. Maximum annual debt service $272,700. Supported loan: roughly $5.42 million.
Same building, same income, and a $2.2 million spread in proceeds between the conventional and insured paths. Rates move and every file prices individually, so treat these as illustrations rather than quotes. But the shape of the result is durable: coverage ratio, rate and amortization compound each other, and the insured path wins on all three at once. This is why we model the insured route on every rental file before defaulting to conventional.
Where borrowers lose DSCR without noticing
The ratio is only as good as the NOI going into it, and lenders do not use your NOI, they use theirs. Underwriters routinely rebuild the operating statement: a vacancy allowance even if the building is full, a management fee even if you manage it yourself, replacement reserves per unit, and normalized repairs rather than last year's lucky number. A building that covers at 1.25 on the listing pro forma often covers at 1.10 on the underwritten numbers. The gap between those two statements is where deals get resized in underwriting, and a broker's job is to underwrite the file the lender's way before the lender does, so the number that comes back is the number you planned on.
What to do with this
If you are buying: size your offer against underwritten NOI at the target lender's coverage, not against the cap rate story. If you are refinancing: rate and amortization move the supported loan as much as the coverage minimum does, which is why the same building refinances very differently across lenders. And if the DSCR math fails at every conventional lender but the building has real equity, that is precisely the situation short term private capital exists for, carry the property until the income matures, then take out into cheaper debt.
DSCR questions we hear most.
Want the number for your building?
Send us the rent roll and operating statement. We will underwrite it the way lenders do and tell you what it supports, conventional and insured, side by side.