You are obtaining a commercial loan in the amount of $1,700,000 and the bank has

Question

You are obtaining a commercial loan in the amount of $1,700,000 and the bank has appraised your property that you are purchasing at $2,400,000. 4. What is your Loan to Value? Calculate the loan payment using the following terms: a. b. i. $1,700,000 ii, 5% interest ii. 25 year mortgage, 12 payments per year iv. Fully amortizing over the 25 years ($O balance at the end of the term) What annual income would you need to generate from the property to have a debt service coverage ratio (DSCR) of 1.50x? c.

Explanation / Answer

Answer a:

Answer b

Monthly Instalment Amount = $9,938

(Calculated using exel function 'PMT')

Answer c

DSCR = Net Operating Income / Total Debt Service

Total Debt Service per year = 9938*12 = $119,256

Therefore, Net Operating Income = 1.5 * 119,256 = $178,885

Loan Amount (A) 17,00,000 Property Value (B) 24,00,000 Loan to Value Ratio (A)/(B) 0.71

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