Your DSCR is too low for a bank refinance. Here is what actually fixes it.

DSCR — debt service coverage ratio — is net operating income divided by annual debt service. Most banks want 1.20x to 1.25x. It is the single number that most often decides how much you can borrow, and right now it is the number turning routine refinances into problems.

Here is the arithmetic doing the damage. A property with $500,000 of net operating income supported roughly a $6.5MM loan when rates were in the high 3s. Run the same NOI against a rate in the high 6s and the coverage test caps proceeds somewhere near $4.7MM. Nothing about the property changed — the math did. If your existing balance sits between those two numbers, you have a coverage problem, and it arrived through no fault of your operations.

What doesn't fix it

Sending the same package to more banks. Bank underwriting boxes are similar enough that a 1.10x deal declined at the first bank is a 1.10x deal declined at the fifth — you lose months learning what a capital markets advisor could have told you on the first call. A coverage shortfall gets solved by changing the underwriting, the structure, or the lender math. Usually some combination.

Fix one: underwrite the NOI a lender will actually accept

Most owner-prepared operating statements understate lendable NOI. One-time expenses sitting in the trailing twelve months — a roof, a legal settlement, a unit turn — get capitalized by a good underwriter, not treated as recurring. Below-market management fees get normalized in your favor if you self-manage at a real cost. Recent rent increases that started mid-year get annualized. A professionally re-underwritten T12 routinely finds 5–10% more supportable NOI than the raw statement shows, and on a coverage-constrained deal that difference is proceeds.

Fix two: structure the loan around the test

Coverage is calculated on the actual payment, so the payment is a lever. An interest-only period drops debt service meaningfully and can carry the loan until income catches up. A 30-year amortization instead of 25 does the same, more modestly. And where the shortfall is temporary and explainable, a reserve can bridge it: we arranged a $22MM refinance for a property whose trailing income could not tell the real story, and the term that got it approved was a six-month payment reserve, posted at closing and released on performance. Structure answers the lender's specific objection; that is different from hoping the objection goes away.

Fix three: change whose math you're using

Not every lender runs the same test. Credit unions and some banks will underwrite at 1.20x where others hold 1.25x — that gap alone is roughly 4% more proceeds. Agency lenders underwrite multifamily with standardized assumptions that often read stronger than a conservative bank's. Life companies reward lower leverage with better pricing, which can make a smaller loan cheaper to carry. And lenders differ on the quiet inputs — vacancy assumptions, management fee loads, replacement reserves — that move the underwritten NOI before the ratio is even calculated. Knowing which lenders' math favors your profile is a large part of what you hire an advisor for.

Fix four: fill the gap instead of fighting it

When the senior loan simply cannot reach the payoff, the shortfall can be capitalized rather than absorbed: a modest cash paydown, or preferred equity or mezzanine capital behind the new senior loan. Gap capital is more expensive than senior debt — but on the right deal it beats both a forced sale and a distressed negotiation with your maturing lender.

Fix five: buy time on purpose

If income is genuinely rising — leases signed but not yet seasoned, a renovation finishing, a vacancy filling — a bridge loan retires the maturing debt and gives the NOI twelve to thirty-six months to grow into the permanent loan it needs. This is the maturity-defense play from our maturity playbook, and the honest test is whether the income growth is a plan or a hope. An advisor worth the fee will tell you which one yours is.

Run this before you call anyone

• Compute your real DSCR at a current market rate on your actual payoff amount — not at your old rate.
• Scrub the T12 for one-time expenses, un-annualized rent increases, and normalization opportunities.
• Price the structural levers — what does IO, longer amortization, or a reserve do to the test?
• Identify whose box you fit — bank, credit union, agency, life company — before applying anywhere.
• Quantify the gap if one remains, so the pref/paydown/bridge conversation is about a number, not a fear.

If you'd rather have a capital markets read on which of the five fixes your numbers support, send us the full picture — we'll respond with preliminary direction, likely structure, and pricing within two business days.

Coverage requirements and leverage levels referenced reflect current market activity and recent lender quotes; actual terms vary by transaction. Nothing here is an offer or a commitment to lend.