How do basis point (bps) increases affect debt service?

100 basis points equals 1.00% in interest rate. On a $3,000,000 commercial mortgage, a 200 bps (+2%) rate spike increases annual interest expense by approximately $60,000 per year.

Updated: August 2026 • Verified v1.2

Commercial Real Estate DSCR Stress Test & Sensitivity Matrix

Q: What happens if a property DSCR drops below 1.25x?

Most commercial loan agreements specify that dropping below a 1.20x or 1.25x DSCR triggers a 'cash trap' event, where the lender seizes control of the property's bank accounts and holds all surplus rental income in escrow until DSCR recovers.

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DSCR = NOI / Annual_Debt_Service; Stressed_NOI = GPR * (1 - Stressed_Vac%) - OpEx

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Understanding Your Results

Generates a 12-cell sensitivity matrix testing interest rates (Base, +100bps, +200bps, +300bps) against vacancy rates (Base, +5%, +10%), highlighting compliant (>1.25x), covenant risk (1.00x-1.24x), and default (<1.00x) zones.

Practical Guidance & Next Steps

Commercial loan agreements frequently mandate a minimum 1.20x - 1.25x DSCR covenant. Dropping below triggers a 'cash trap' where the lender sweeps all net rental income into a reserve escrow.

What is this?

A commercial property underwriting utility that calculates a multi-variable sensitivity matrix testing property DSCR against rate hikes and vacancy shocks.

How does it work?

1. Enter property rent, operating expenses, vacancy, and loan balance. 2. View the 12-cell sensitivity matrix showing DSCR across rate spikes and vacancy surges. 3. Identify interest rate ceilings before cash-trap or default triggers.

Why use it?

Protects real estate investors from floating-rate debt distress and covenant default traps.

Technical Scope & Calculation Limitations

Models standard commercial property amortizing debt and fixed operating expense structures.

Frequently Asked Questions

Most commercial loan agreements specify that dropping below a 1.20x or 1.25x DSCR triggers a 'cash trap' event, where the lender seizes control of the property's bank accounts and holds all surplus rental income in escrow until DSCR recovers.

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