Quick Answer
Maximum loan amount = (NOI ÷ Target DSCR) ÷ (Annual Payment per $1M × Loan Amount in Millions), allowing you to reverse-engineer supportable loan size from property cash flow.** With $36,000 NOI and 1.25 target DSCR at 7.5% interest, maximum supportable loan is approximately $320,000-$350,000. Adjust your target DSCR, rate, or amortization to model different scenarios.
Key Takeaways
- Higher DSCR target reduces maximum loan amount: 1.25 DSCR supports smaller loans than 1.0 DSCR with same NOI
- Lower interest rates increase borrowing capacity: 1% rate reduction can add $20,000-$40,000 to supportable loan amount
- Longer amortization boosts max loan: 30-year term supports 10-15% larger loans than 20-year term
- Lender overlays may cap LTV regardless of DSCR: Strong cash flow doesn’t override 70-80% LTV limits
- Model stress scenarios: Test 0.5-1.0% rate increases and 5-10% rent reductions before committing
FAQ
Q: What DSCR do most lenders require? A: Most DSCR lenders require a minimum ratio of 1.0 to 1.25. Some will go as low as 0.75 with higher reserves or lower LTV.
Q: How do I increase my supportable loan amount? A: Increase NOI by raising rent or reducing expenses, lower your interest rate, or extend the amortization term.
Q: Does this work for multi-property portfolios? A: Yes. Aggregate NOI across properties and run blended DSCR scenarios to find your total borrowing capacity.
Next Step
Use the DSCR Calculator to model your specific property and see what loan amount you can qualify for based on your target coverage ratio.