Max Loan Amount Formula for Commercial Real Estate

The maximum commercial real estate loan amount is not a single formula. It is the lowest result produced by several lender constraints applied to the same deal. A lender calculates a ceiling under each test and lends the smallest one.

The three core formulas are:

Max Loan by Debt Yield = NOI / Minimum Debt Yield
Max Loan by DSCR       = (NOI / Minimum DSCR) / Loan Constant
Max Loan by LTV        = Property Value x Maximum LTV

Max loan by debt yield

Debt yield sizing is the fastest income-based formula because it needs only two inputs. If NOI is $800,000 and the lender requires a 10% debt yield:

$800,000 / 10% = $8,000,000

There is no rate, amortization, or appraisal in this formula, which is why lenders — especially CMBS originators — use it as a rate-proof backstop. To go deeper on the thresholds, see what is a good debt yield.

Max loan by DSCR

DSCR sizing starts with the maximum annual debt service the income can support:

Max Annual Debt Service = NOI / Minimum DSCR

Then you convert that debt service into a loan balance using the loan constant — annual debt service divided by loan amount, which depends on the interest rate and amortization period.

Max Loan by DSCR = Max Annual Debt Service / Loan Constant

Because the loan constant moves with rate and term, DSCR sizing is the only one of the three formulas that changes when financing terms change. The table below shows approximate loan constants you can use to convert debt service into proceeds:

So $800,000 of NOI at a 1.25x minimum DSCR supports $640,000 of annual debt service. At a 6.5%, 30-year loan constant of 7.58%, that sizes to roughly $640,000 / 7.58% = $8,443,000. You can estimate the payment side with the commercial mortgage payment calculator.

Max loan by LTV

LTV sizing is value-based and the simplest of the three:

Property Value x Maximum LTV

A $20,000,000 property at 70% max LTV supports $14,000,000. Isolate this leverage test with the LTV calculator.

Putting all three together

Take a property with $1,000,000 NOI, a $13,000,000 value, a 6.5% rate over 30 years, and lender limits of 75% LTV, 1.25x DSCR, and a 9% debt yield.

The maximum loan is $9,750,000, because LTV is the lowest of the three. That lowest result is the binding constraint — the only limit that actually sets proceeds.

Which constraint usually binds

• LTV binds when value is low relative to income, or the leverage cap is conservative.
• DSCR binds when interest rates are high or amortization is short, because annual debt service rises and the loan constant climbs.
• Debt yield binds when a lender enforces a firm income floor, common on CMBS, bridge, and higher-risk loans.

Common mistakes

• Sizing on one formula. A strong LTV says nothing about whether income covers the debt. Run all three.
• Forgetting the loan constant. Dividing NOI by DSCR gives debt service, not a loan amount — you still have to divide by the loan constant.
• Using gross income instead of NOI. Every formula starts with net operating income after vacancy, expenses, and reserves.

Run the three formulas side by side with the max loan amount calculator, or walk a full numeric deal in the CRE loan sizing example.