Serviceability

Serviceability is a lender's assessment of whether a borrower's income is sufficient to meet a facility's repayments, typically tested by comparing net income against total debt obligations including the new loan, often expressed through a coverage ratio such as ICR or DSCR. On longer-term, income-producing facilities such as commercial property loans, serviceability is central to the assessment; on short-term, asset-backed products with a defined exit, such as a caveat loan, it matters far less since the loan is not expected to be serviced from ongoing income for an extended period. Lenders generally stress-test serviceability against a buffer above the actual facility rate, to allow for rate movements over the loan's term. Borrowers whose income is seasonal, recently changed, or spread across several entities often need to present serviceability evidence more deliberately, showing the full picture rather than a single year in isolation.

Related

Commercial property loans · ICR · DSCR