🏦 How South African Banks Assess Property Finance

1️⃣ Income First — Always

Banks don’t lend on hopes — they lend on cash flow. Their first question is simple:

“Can this property pay for itself?”

They start with Net Operating Income (NOI) — your rental income after deducting real-world operating costs like:

• Rates and taxes
• Maintenance and insurance
• Management and admin fees

That’s the figure banks trust, and it’s the same figure our calculator uses. You’ll instantly see how much income your property truly generates in bankable terms.

💡 Tip: Overstating rent or understating expenses can shrink your loan size — our calculator shows that impact in real time.

2️⃣ Cap Rates Shape Value

Once the NOI is clear, banks apply a capitalisation rate (cap rate) to determine market value: Value = Annual NOI ÷ Cap Rate

• A tighter cap rate (e.g. 9%) pushes your value higher.
• A looser one (e.g. 11%) pulls it down.

That single percentage quietly defines what your property is worth to the bank. Our calculator lets you slide the cap rate and watch your valuation update instantly — just like a lender’s internal model.

📈 Prime locations and blue-chip tenants attract lower cap rates — and higher valuations.

3️⃣ DSCR Sets the Loan Limit

Next comes the Debt Service Cover Ratio (DSCR) — a measure of how comfortably your income covers the bond repayment.

Typical thresholds:

• 1.30× = healthy coverage
• 1.50× = strong coverage
• Below 1.25× = credit concern

Your DSCR effectively caps how much the bank is willing to lend. Our calculator runs this logic automatically, showing the maximum loan your NOI can support under different DSCR targets.

📊 Move the DSCR slider to see how tighter coverage requirements reduce borrowing power.

4️⃣ LTV vs DSCR — Which One Rules?

Two limits, one outcome:

• Loan-to-Value (LTV): banks rarely exceed 70–75% of market value.
• DSCR: determined by your property’s actual cash flow strength.

The smaller of the two wins — and that’s your real loan ceiling.

⚖️ Cap rates drive your value. DSCR drives your funding. Our tool shows both — so you can see exactly where your deal tops out.

5️⃣ Why This Matters Before You Apply

Running your deal through our calculator gives you:

• ✅ A bank-ready preview of valuation and loan size.
• ✅ Clarity on which factor limits your deal — income, expenses, or risk.
• ✅ Confidence when talking to lenders or investors.

No forms. No waiting. Just a live, transparent snapshot of how your property performs under true bank logic.

6️⃣ Test Your Deal Now

See what your property can finance in under 30 seconds:

1. Enter your net operating rental.
2. Adjust your cap rate to reflect your market.
3. Slide your DSCR to test affordability.