Rising InterestRates Cause Debt Coverage
Compression on CRE Loans
For a Sample Loan with These Characteristics:
NOI
Cap Rate
Value
LTV
Loan
$100,000
7.5%
$1,333,333
80%
$1,066,666
Coverage Shrinks as Interest Rates Rise:
Rate on Loan
6.0%
6.5%
7.0%
7.5%
Coverage Ratio
1.56x
1.44x
1.33x
1.25x