'Swift Shipping Co.' is looking to purchase a new industrial warehouse in Edmonton. The mortgage broker has identified that conventional lenders typically require a Debt Service Coverage Ratio (DSCR) of at least 1.20 for industrial properties with a stable tenant. 'Swift Shipping Co.' has a projected Net Operating Income (NOI) of $600,000 from the property and is applying for a mortgage with annual debt service payments of $480,000. What should the mortgage broker advise 'Swift Shipping Co.' regarding their DSCR?

Question: 'Swift Shipping Co.' is looking to purchase a new industrial warehouse in Edmonton. The mortgage broker has identified that conventional lenders typically require a Debt Service Coverage Ratio (DSCR) of at least 1.20 for industrial properties with a stable tenant. 'Swift Shipping Co.' has a projected Net Operating Income (NOI) of $600,000 from the property and is applying for a mortgage with annual debt service payments of $480,000. What should the mortgage broker advise 'Swift Shipping Co.' regarding their DSCR?

Answer options: ✅ The DSCR is 1.25, meeting the typical lender requirement.

• The DSCR is 1.15, falling below the typical lender requirement.
• The DSCR is 1.30, exceeding the typical lender requirement.
• The DSCR is exactly 1.20, barely meeting the requirement.

Correct answer: The DSCR is 1.25, meeting the typical lender requirement.

Explanation: The Debt Service Coverage Ratio (DSCR) is calculated as Net Operating Income (NOI) divided by annual debt service. For Swift Shipping Co., the DSCR is $600,000 / $480,000 = 1.25. This ratio exceeds the typical lender requirement of 1.20, indicating a strong financial position for the loan.