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Debt Service Shock Calculator
Rate resets and refinances create payment shocks that can overwhelm DSCR.
Monthly payment increase
$19,253
New DSCR
1.07
New monthly payment
$69,921
How the math works
Standard amortization formula for each rate. Increase = new − current. New DSCR = NOI ÷ (new × 12).
$10M at 4.5% 30-yr = $50.7k/mo vs 7.5% = $69.9k/mo. Increase $19.2k/mo. $900k NOI / $839k DS = 1.07 DSCR.
How to Use
- Enter loan balance.
- Enter current interest rate %.
- Enter new interest rate %.
- Enter amortization years.
- Read monthly + DSCR impact.
Frequently Asked Questions
What causes debt service shock?
Three main causes: (1) Floating-rate loan reset (SOFR + spread moves up — 2022-2024 floating-rate borrowers saw 500+ bps increase), (2) Fixed-rate refinance into higher-rate market (2020 5% rate → 2024 7.5% rate on refinance), (3) Interest-only step to amortization (IO payments rise 30-50% on amortization trigger). Each can increase debt service 20-60%. If NOI hasn't grown to match, DSCR collapses and loan may technically default.
How big can shock be?
$10M loan at 4.5% IO = $37.5k/mo. Same loan refinanced at 7.5% fully amortizing 30 years = $69.9k/mo. That's 86% increase — catastrophic for operators who didn't stress-test. Smaller shocks (25-40%) common on reset alone. Institutional operators forecast debt service at each loan maturity year 3 out in budget models. Amateur operators underestimate timeline to recovery.
What's the DSCR impact?
DSCR = NOI ÷ Debt Service. If NOI stays flat and debt service rises 50%, DSCR drops 33%. A 1.40 DSCR becomes 0.93 — technical default. Lenders require 1.15-1.25 minimum; below that, you may not be able to refinance. Operators should stress test NOI vs debt service with 200 bps rate increase assumption. Most 2020-2021 vintage bridge loans didn't — and the 2022-2024 reset wave has been brutal.
How do you manage debt service shock?
(1) Buy interest rate caps (protects against upside — 100-350 bps of loan value for 3-5 year term). (2) Lock fixed-rate at closing even if spread higher. (3) Build NOI aggressively year 1-2 to grow cushion. (4) Reserve excess cash flow for eventual refi shock. (5) Consider prepayable loans (give up spread discount for optionality). (6) Early refinance at attractive windows rather than waiting for maturity. Institutional sponsors manage rate risk as distinct line in portfolio strategy.
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