Free calculator · Debt & Financing
Loan Sizing & The Binding Constraint
Sizes the maximum commercial mortgage under LTV, DSCR, and debt yield tests and shows which constraint binds. Inputs are property value, annual NOI, interest rate, amortization period, and the maximum LTV, minimum DSCR, and minimum debt yield thresholds.
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Loan Sizing & The Binding Constraint
Inputs
Your turn
Size the largest loan this lender will actually fund, then say what equity the sponsor has to write.
A stabilized asset is valued at $10,000,000 and produces $600,000 of NOI. The lender quotes 6.75% on a 25-year amortization schedule, and underwrites to three tests at once: a maximum 65% LTV, a minimum 1.25× DSCR, and a minimum 10.0% debt yield.
All three have to pass, so size each one and see which runs out of room first.
Round to the nearest dollar. Within 1% counts as correct.
Purchase at the stated value, no closing costs. Within 1.5% counts as correct.
NOI divided by the loan you sized above. Within 0.15% counts as correct.
Learn the concept
This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.
Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.