The single number that decides whether your investor mortgage gets approved.
Debt Service Coverage Ratio is what commercial lenders actually underwrite. Run the math before applying — and back-solve the maximum loan your NOI supports.
Vet the loan before applying.
Book a 30-minute investor consultation. We’ll model the DSCR against multiple lender thresholds (bank vs CMHC vs B-lender), identify the structure most likely to close, and surface any rent-roll or expense issues that will surface in underwriting.
Email me a DSCR analysis for a specific property
Why DSCR is the single most important number on an investor mortgage application
Commercial and investor mortgages are underwritten on the property’s income, not the borrower’s. The lender’s question is simple: does the property generate enough rent to comfortably cover the proposed mortgage payment? The math: Debt Service Coverage Ratio = NOI ÷ Annual Debt Service. If NOI is $200,000 and the proposed mortgage requires $160,000 in annual debt service, DSCR = 1.25 — the property earns 1.25× the loan payment. Lender thresholds: below 1.00 means the property doesn’t even cover the mortgage, instantly unfinanceable. 1.00-1.20 is the danger zone — some B-lenders and credit unions will fund here at higher rates, but most major banks decline. 1.20-1.35 is the typical sweet spot for major bank commercial mortgages. Above 1.35 is strong and unlocks the best rates and longest amortizations. The number matters more than your personal income because it determines how the property survives a rate shock — at 1.25 DSCR, a 100bps rate increase compresses to ~1.10, still viable. At 1.05 DSCR, the same shock turns the property negative. Lenders are stress-testing for the 100-200bps shock at underwriting, so they want headroom going in.
How DSCR differs between residential rentals, multi-residential, and commercial
The asset class changes both the threshold and how NOI is calculated. Residential 1-4 units, non-owner-occupied: lenders use a “rental offset” approach — they include 50-80% of gross rental income against your personal income, then apply standard GDS/TDS ratios. DSCR isn’t formally calculated, but the implicit DSCR equivalent is in the 1.10-1.20 range. Multi-residential (5+ units): pure commercial underwriting. Lenders use a normalized NOI (rents at lease level, expense ratio at 30-40% of gross rent depending on building age, vacancy reserve 3-5%), require DSCR 1.20-1.30 minimum. CMHC-insured multi-residential under MLI Select gets more favourable amortizations (up to 50 years in some cases) and lower DSCR requirements (often 1.10) in exchange for affordability covenants. Retail / Office / Industrial: lenders look at NOI from current leases plus the credit quality of tenants. DSCR thresholds typically 1.25-1.40 depending on tenant mix and lease term remaining. Single-tenant industrial with 10-year lease to investment-grade tenant gets the best treatment. Multi-tenant retail with short remaining lease terms gets the most conservative treatment. The calculator above uses a generic commercial framework; for asset-specific underwriting, you need a commercial mortgage broker who knows the lender appetites for your asset class.
Strategies that improve DSCR without changing the property
If your DSCR is sitting at 1.10-1.18 and you need to push it above the 1.20 threshold, three operational levers can move it without changing the building. (1) Reduce expenses, conservatively: many properties carry expense items that are above market — over-paying property management, multiple insurance policies that could consolidate, deferred maintenance projects deferred to the buyer. A 10% reduction in operating expenses on a property with 35% expense ratio lifts NOI by ~3.5%, lifting DSCR by the same. Lenders accept these adjustments if documented (vendor quotes, new management contracts). (2) Lengthen amortization: switching from 25 to 30 years on a $2M loan at 6.5% reduces monthly payment by ~12%, lifting DSCR proportionally. CMHC multi-residential and some B-lenders offer 30-40-50 year amortizations; non-CMHC commercial typically caps at 25-30. (3) Lower the loan amount: putting more equity in shifts the loan smaller and lifts DSCR. A $2M loan at 6.5% / 25-year = ~$160K annual debt service; the same property with a $1.7M loan = ~$136K, which lifts DSCR by ~18%. The trade-off is opportunity cost of trapped equity vs the spread between cap rate and mortgage rate. Book a 30-min investor consultation to model these levers against your specific property — typically 1-2 hours of analysis reveal a structure that’s 50-100bps better than the first underwriting pass.
Related tools: cap-rate calculator · NOI valuator · investor resources · mortgage affordability (residential)