Debt Sizing and Refinance

How It Works

Payment per dollar borrowed: pmt(rate ÷ 12, amortization × 12, 1), and the annual constant is 12 times that. On an interest-only loan the constant is the rate, times 365 ÷ 360 on actual/360.

A floating rate is the index plus the spread. The index for each loan year is today's figure, or your path. The loan never charges less than the floor, and a rate cap pays back whatever the index runs above the strike, so the rate paid is max(index, floor) − max(0, index − strike) + spread. Lenders size a capped floating loan at the worst rate the cap allows, the strike plus the spread; you can size it at the month 1 rate instead. The cap's cost is paid at close with the loan costs. A floating loan re-amortizes every month: pmt(rate ÷ 12, months of amortization left, balance).

Where the index comes from: SOFR and the 30, 90 and 180-day SOFR averages as the New York Fed publishes them, read by this site's server and kept for 3 hours. If that read fails, the page uses a copy saved on 3 Oct 2026 and says so. Term SOFR, forward curves and swap rates are licensed data that cannot be republished here, so they are yours to type: pick your own index for Term SOFR, and use the path for a view of where the index goes. Any figure the page fills in can be typed over.

The ceilings: value × LTV, NOI ÷ (DSCR × constant) and NOI ÷ debt yield. The loan is the smallest of the tests switched on, rounded down if you ask. The gap to the next ceiling is how far that test would have to move before another one takes over.

The rate at which coverage binds is found by bisection: the rate at which NOI ÷ (DSCR × constant(rate)) equals the lowest of the ceilings that do not depend on the rate. Above it, every rise in the rate costs proceeds.

Why lenders size on the amortizing payment through an interest-only period: the IO period ends, and the loan has to cover its amortizing payment from then to maturity. Sizing on the IO payment gives a bigger loan that may fail its own coverage test in year 3.

The schedule is monthly: interest is the balance at the start of the month times rate × days ÷ 360, where days is 30 on 30/360 and the days in the calendar month on actual/360; during the IO months the payment is the interest alone; after them a fixed loan pays pmt(rate ÷ 12, amortization × 12, loan) for as long as the term lasts, and principal is the payment less the month's interest. The balloon is the balance at maturity. NOI in loan year y is NOI × (1 + growth)^(y − 1), and the DSCR by year is that NOI over the year's debt service.

Step-down prepayment is the year's percentage times the balance being repaid. Yield maintenance pays the lender the interest spread it loses on the scheduled balance for every remaining month, discounted at the Treasury: Σ ((note rate − Treasury) ÷ 12 × scheduled balance) ÷ (1 + Treasury ÷ 12)^m, never below the floor times the balance. It protects the lender's spread over Treasuries, which is why it shrinks as the loan nears maturity and grows when Treasury yields fall. On a floating loan the same sum runs on the loan spread instead of note rate less Treasury: spread maintenance.

The refinance: forward NOI is NOI × (1 + growth)^k at the end of loan year k, the value is that NOI over the refinance cap rate, and the new loan is the smallest of its 3 tests. Cash out is new loan − payoff balance − prepayment − refinance costs; a negative figure is cash the owner has to bring.

The all-in cost is the monthly rate that sets the loan's cash flows to zero (the net proceeds in, every payment and the payoff out), times 12, so it compares directly with the note rate. Equity at close is the value plus the loan costs less the loan.

The trap is sizing proceeds off LTV alone. At these rates coverage binds long before value on most stabilized deals, and the gap is often more than $1,000,000 on a loan this size.