Coverage and leverage ratios answer different questions. DSCR compares property income with annual debt service, debt yield compares property income with loan principal, and LTV compares the loan with value. A lender may normalize each input differently, so an online ratio is a screening calculation—not an approval.
This is general information, not legal, tax, environmental, engineering, accounting or investment advice. Obtain advice specific to the property and transaction.
1. Property-level DSCR starts with lender-defined NOI
The U.S. OCC commercial real estate lending handbook defines property DSCR as NOI divided by annual debt service. The ratio measures how much modelled property income exists for each dollar of required annual principal and interest.
Lenders may normalize rent, vacancy, recoveries, management fees, reserves or capital items before accepting NOI. Use the lender's definition and underwritten debt service, not only the seller's stated NOI and a preliminary payment estimate.
2. Business DSCR can use a different numerator
BDC describes a business debt-service coverage calculation using business earnings and principal plus interest. That is not automatically the same as a property-level NOI coverage ratio.
Owner-occupied financing may require analysis of both the operating business and the real estate. Label the ratio, numerator, denominator and period so property coverage is not confused with corporate or guarantor cash flow.
3. Debt yield removes interest rate and amortization from the ratio
Debt yield is NOI divided by loan amount. The OCC notes that this measure is independent of interest rate, amortization and capitalization rate, which makes it a distinct leverage and downside lens.
A debt-yield calculation does not replace DSCR or LTV. It also depends on supportable NOI and does not capture every borrower, lease, capital or environmental risk.
4. LTV depends on a supportable value conclusion
Loan-to-value divides loan principal by property value. A purchase price, broker opinion, assessed value and independent appraisal are not interchangeable.
Appraisal Institute of Canada standards require market evidence for income, expenses and capitalization or discount rates when those methods apply in a professional appraisal. A calculator can show arithmetic but cannot establish market value.
5. Reverse the ratios to expose constraints
Dividing NOI by a lender-supplied target DSCR shows the annual debt service supported by that assumption. Dividing NOI by a lender-supplied debt-yield requirement shows a corresponding loan amount. Applying an LTV limit to an accepted value shows another loan constraint.
The lowest result may influence preliminary sizing, but fees, amortization, interest rate, recourse, covenants, borrower strength and lender policy still matter. Do not publish generic lender thresholds as guaranteed Canadian terms.
6. Prepare a lender-verifiable package
Reconcile leases, rent roll, operating statements, property tax, insurance, capital plan and borrower information before relying on a ratio. Identify material expiries, arrears, concessions and non-recurring income.
Use a qualified lender or mortgage professional for terms and approval, an accountant for financial and tax treatment, and an appraiser for appraisal conclusions.
Primary sources
Verify the current rules.
Government and regulator pages can change. These links were reviewed on August 26, 2026.
U.S. OCC: Commercial Real Estate Lending Comptroller's Handbook↗BDC: Debt service coverage ratio↗CMHC: 2024 Canadian Rental Housing Development Survey summary↗Appraisal Institute of Canada: CUSPAP 2024↗A real property decision?
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