Question

Ann wants to buy a building. The annual NOI will be $100,000 She wants a 30 year fully amortizing fixed rate mortgage at an annual rate of 5% with compounding monthly payments. The lender has a minimum DSCR of 1.2. If Ann gets a 50% LTV loan for $500,000 what is her DCSR?

Answer 1

Monthly payment	=	[P × R × (1+R)^N ] / [(1+R)^N -1]
Using the formula:
Loan amount	P	$                                                          500,000
Rate of interest per period:
Annual rate of interest		5.000%
Frequency of payment	=	Once in 1 month period
Numer of payments in a year	=	12/1 =	12
Rate of interest per period	R	0.05 /12 =	0.4167%
Total number of payments:
Frequency of payment	=	Once in 1 month period
Number of years of loan repayment	=	30
Total number of payments	N	30 × 12 =	360
Period payment using the formula	=	[ 500000 × 0.00417 × (1+0.00417)^360] / [(1+0.00417 ^360 -1]
Monthly payment	=	$                                                         2,684.11

Her annual payment = 2684.11 * 12 = 32,209.32

DSCR = 100,000/32,209.32 = 3.10

Answer is 3.10

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