The amount you can borrow through a multifamily refinance loan depends on more than the property’s estimated market value. Lenders generally assess how much debt the building’s income can support, the property’s value, existing mortgage obligations and the requirements of the loan programme. A building with substantial equity may still qualify for less financing than expected if its NOI is insufficient to meet the lender’s debt service coverage ratio (DSCR).
Start by calculating NOI using actual operating figures. Subtract vacancy and credit losses from potential rent, add documented additional income and deduct operating expenses such as property taxes, insurance, maintenance, utilities and management. Mortgage payments should not be deducted when calculating NOI. Once you have a reliable NOI figure, estimate the maximum annual debt service the property could support. For instance, $240,000 in NOI at a required DSCR of 1.25x supports $192,000 in annual debt service. The final loan amount depends on the repayment terms and applicable underwriting criteria.
Next, estimate the property’s value using realistic market evidence. A simplified income-based calculation divides NOI by a relevant cap rate. If annual NOI is $240,000 and the assumed cap rate is 6%, the implied value is $4 million. This is an illustration, not a guaranteed appraisal. A lender may use comparable transactions and other valuation methods, and the final loan may be restricted by a maximum loan-to-value ratio or debt-yield requirement. Investors should therefore calculate both income-supported borrowing capacity and value-based limits.
Finally, account for the existing mortgage balance and transaction costs. The potential new loan must be sufficient to meet the intended refinancing purpose, but any cash-out proceeds depend on the amount approved and the costs deducted at closing. Review the current loan’s repayment terms, any applicable prepayment charges and the proposed financing structure. InstaLend’s published multifamily term loan programme includes refinancing and cash-out for eligible properties with five or more residential units. Before applying, prepare the property’s NOI, occupancy, rent roll, estimated value and outstanding debt details. These figures provide a more reliable starting point for estimating borrowing capacity than property value or equity alone.