DCR — the loan-size constraint that usually binds.
Debt Coverage Ratio is the ratio of property NOI to annual debt service. CMHC enforces a minimum DCR that depends on program, segment, and term length — and if the property's NOI can't support the ratio at the requested loan size, the loan is cut back regardless of how much LTV room is available.
There is no residential-style stress test for multi-family. Annual debt service is computed on the actual insured loan amount (principal plus capitalized premium) at the contract rate for fixed-rate loans, or a lender-specified ceiling rate for floating-rate loans.
DCR = NOI / Annual Debt Service
NOI is Effective Gross Income minus all operating expenses (taxes, insurance, landlord-paid utilities, maintenance, management, and replacement reserves). Annual debt service is principal plus interest on the insured loan amount — which includes the capitalized CMHC premium.
For fixed-rate loans, DCR is computed at the contract rate. For floating-rate loans, a lender-specified ceiling rate is used. There is no universal stress-test uplift (e.g. the residential 4.79% qualifying rate).
If LTC at 95% would have allowed $9.5M, DCR binds and reduces the loan to ~$8.4M — the borrower needs the difference in additional equity.
What goes into NOI.
CMHC does not publish universal opex assumptions. Every expense line is built from three years of actual property statements (or market comparables for new construction).
| Line item | CMHC treatment |
|---|---|
| Gross potential rent | Achievable market rents per unit type, grossed up to 100% occupancy. |
| Less: vacancy + bad debt | From Rental Market Survey at the local CMA level, floor applied even in tight markets. |
| = Effective Gross Income (EGI) | Plus ancillary income (parking, laundry, storage, commercial NRI). |
| Less: property taxes | Post-reassessment where available; confirmed against municipal roll. |
| Less: insurance | Actual broker quote or current policy premium. |
| Less: utilities | Landlord-paid portion only; tenant-paid utilities excluded. |
| Less: repairs and maintenance | Actual 3-year average from statements. |
| Less: property management | 3–5% of EGI minimum — applied even if self-managed. |
| Less: replacement reserves | CMHC-dictated at submission; industry practice $250–500/unit/year or 2–4% of EGI. |
| = Net Operating Income (NOI) | The numerator in the DCR calculation. |
See the opex page for benchmark ranges, vacancy assumptions, and replacement reserve practice.
Segment-specific DCR floors.
MLI Standard minimum DCR varies by unit count, term length, and transaction type. MLI Select applies a flat 1.10 across all tiers.
| Segment | Min DCR |
|---|---|
| 7+ units, term ≥10yr | 1.20 |
| 7+ units, term <10yr | 1.30 |
| 5–6 units, purchase | 1.10 |
| 5–6 units, refinance | 1.20 |
MLI Select — regardless of whether the project scores 50, 70, or 100 points — uses a 1.10 minimum DCR. This is lower than MLI Standard's 1.20–1.30 range and is one of the reasons MLI Select supports higher LTC.
No residential stress test.
The 4.79%/qualifying-rate stress test applied to residential mortgages does not apply to multi-family. For fixed-rate loans, DCR is computed at the contract rate. For floating-rate loans, the lender specifies a ceiling rate — typically the contract rate plus a buffer.
This is one of several reasons multi-family lending sits in a specialized ecosystem (monolines, life cos, credit unions) rather than the residential-heavy Big 6.
Step 1. Compute NOI from EGI less opex (see NOI build above).
Step 2. Divide by required min DCR to get maximum annual debt service.
Step 3. Solve for the loan amount where P+I at contract rate and chosen amortization equals that max debt service.
Step 4. Compare against the LTV/LTC-implied cap. Fund the lesser of the two.