This tool stress-tests a commercial real estate loan by modeling the impact of rising interest rates, cap rate expansion, and increased vacancy on Debt Service Coverage Ratio (DSCR), Loan-to-Value (LTV), and Debt Yield. Enter the property's projected income and loan terms below. Results include individual stress scenarios, a combined DSCR matrix, and breakeven occupancy.
Holding NOI constant, higher debt service from a rising note rate reduces coverage. This analysis shows how DSCR deteriorates at each rate increment for a fixed-rate, fully amortizing loan.
| Scenario | Rate | Monthly Payment | Ann. Debt Service | DSCR | Change vs. Base |
|---|
Cap rate expansion reduces the implied property value under the direct capitalization method, increasing LTV even with no change in NOI or loan balance. This is relevant for refinance risk and collateral adequacy at maturity.
| Scenario | Cap Rate | Implied Value | LTV | Change vs. Base |
|---|
Increased vacancy reduces effective gross income while operating expenses remain fixed, compressing NOI. The stressed NOI also reduces implied property value under the direct capitalization method, which affects both DSCR and LTV simultaneously.
| Scenario | Occupancy | Eff. Gross Income | Stressed NOI | DSCR | Implied Value | LTV |
|---|
Combined impact of simultaneous interest rate increases (columns) and vacancy increases (rows) on DSCR. Cells are color-coded: ■ ≥ 1.20x ■ 1.00x – 1.19x ■ below 1.00x.
Cap rate held at base case. DSCR = Stressed NOI ÷ Debt Service at stressed rate.
Three predefined scenarios apply simultaneous shocks to interest rate, capitalization rate, and vacancy. These represent a range of market stress conditions and are intended to bracket plausible adverse outcomes over a typical loan term.