A commercial property can have plenty of equity and still produce too little income to support the mortgage requested. Another property can cover its payments comfortably but need more cash from the buyer because the loan is too large for its value.
That is why a useful commercial mortgage estimate checks both debt service coverage ratio (DSCR) and loan-to-value (LTV). Start with the property, then ask whether the lender also assesses the wider business and borrower. This worked example shows how to separate those questions.
What DSCR and LTV each tell you
For an income-producing property, DSCR = annual net operating income ÷ annual mortgage debt service. Net operating income, or NOI, is rent and other property income after the vacancy allowance and eligible operating expenses. Mortgage principal and interest belong in debt service, not in those operating expenses. CMHC's explanation of property debt coverage describes this relationship.
A DSCR of 1.25 means there is $1.25 of assessed operating income for every $1 of assessed debt service. It does not mean the property has a 25% profit margin. The required coverage and permitted adjustments depend on the lender and program.
LTV = mortgage amount ÷ accepted property value × 100. A $1.5 million mortgage against a $2 million accepted value is 75% LTV. The lender must accept the value used. BDC explains the LTV calculation and why collateral value is only part of a lending decision.
One property, two separate borrowing limits
Suppose a rental building has a $2 million accepted value and $150,000 of annual NOI. For this illustration, use a 1.25 DSCR target, a 75% LTV ceiling, a 6% nominal annual mortgage rate compounded semi-annually, monthly payments and 25-year amortization. The rate and target are example assumptions, not an offer.
| Test | Calculation | Result |
|---|---|---|
| Debt payments supported by NOI | $150,000 ÷ 1.25 | $120,000 a year |
| Monthly payment capacity | $120,000 ÷ 12 | $10,000 |
| Mortgage supported by that payment | 6%, 25 years, stated payment convention | $1,562,972 |
| Mortgage supported by LTV | $2,000,000 × 75% | $1,500,000 |
The smaller limit is $1.5 million. Here, value limits the mortgage before income does. Its monthly principal and interest payment is approximately $9,597.10, producing a DSCR of about 1.30. A purchase would need $500,000 of equity, plus applicable closing costs, fees and reserves.
MyMortgageMate's commercial calculator uses a 75% LTV safeguard. That is the tool's model ceiling, not a rule covering every Canadian commercial mortgage. Other programs can have different limits; for example, CMHC Standard Rental Housing has its own eligibility and LTV framework.
Now reduce the income and test it again
Keep the same value, rate, amortization and coverage target, but reduce annual NOI to $120,000. This could represent a more conservative rent roll or higher operating expenses.
| Measure | Original case | Lower-income case |
|---|---|---|
| Annual NOI | $150,000 | $120,000 |
| Annual debt service at a 1.25 target | $120,000 | $96,000 |
| Mortgage supported by DSCR | $1,562,972 | $1,250,378 |
| Mortgage supported by 75% LTV | $1,500,000 | $1,500,000 |
| Smaller modelled limit | $1,500,000 | $1,250,378 |
Income now limits the mortgage. The same $1.5 million request would still be 75% LTV, but its DSCR would fall to about 1.04, below the example's 1.25 target. A comfortable LTV does not repair that shortfall. Loan amounts above are rounded to the nearest dollar; payments and ratios use unrounded figures.
Commercial TDS: when the whole file matters
Some commercial programs also assess the borrower's personal affordability. This may be described as a total debt service ratio, or TDSR. Other reviews use a global cash-flow or coverage assessment. Ask which method applies; the names do not establish one shared formula.
There is a concrete example: Home Trust's publicly linked commercial product guide lists a TDSR up to 60% for Small Commercial, alongside a minimum DSCR of 1.10. Its Large Commercial column lists TDSR as not applicable. Eligibility and ratio methods vary by lender, property and program.
For a whole-file review, organize the business's sustainable income and debt payments, the property's income and costs, and the owner's other verified income, home costs and personal debts. Independent income may strengthen the file, while additional obligations can weaken it. Salary or dividends paid by a company must be reconciled with the company's figures so the same cash is not counted twice.
Ask the lender to confirm accepted income, expense adjustments, qualifying payments, the required ratio and whether property DSCR must also pass. OSFI's commercial real estate notice also calls for a wider financial review. A whole-file assessment can reveal a suitable lending route; it does not automatically override a separate property or loan-limit condition.
Put the comparison to work in MyMortgageMate
- In Income, enter the supported property income and vacancy assumptions.
- In Expenses, enter the operating costs once. Keep the mortgage payment out of NOI expenses.
- In Mortgage, choose Purchase or Refinance, enter price or value, and use the same rate, amortization and compounding assumptions across comparisons.
- Check DSCR and LTV together, then test lower income, higher expenses or a higher rate. Read any qualification explanation even when results remain visible.
- Use Print / Save to keep the application and Deal Synopsis with a clear version name.
The current Commercial DSCR Calculator models the property analysis. It does not complete a lender's personal TDSR or global business-and-borrower assessment. Keep that lender worksheet separate. Our DSCR guide explains the foundation, and the multi-unit financing guide helps identify the property assessment to discuss.
For a refinance, the modelled loan is only the starting point for cash available. Deduct the existing mortgage payout, other debts being repaid, penalties and transaction costs. Bring those figures and the supporting income records to the lender conversation so the next step rests on a calculation everyone can follow.
Put the figures into a scenario
Use the appropriate assumptions, compare the results and save a summary for your file.
Open the Commercial DSCR Calculator →Sources and review
References checked October 14, 2026. Examples are illustrative; confirm the lender, insurer and program requirements for your situation.