Korea Commercial Mortgage RTI & Vacancy Stress Calculator
Stress-test a Korean commercial-property mortgage across vacancy, rent decline, and rate increases, then compare RTI, cash flow, break-even points, a planning loan limit, and a twelve-month reserve.
1. Purchase and debt structure
Enter the purchase funding mix and any existing debt secured by the same property.
KRW
KRW
KRW
%
KRW
%
KRW
Included in cash flow, while RTI uses interest expense only.
years
2. Rental income and operating costs
Contract rent is reduced for rent decline and vacancy, then deposit income and other rental income are added.
KRW
KRW
%
This is an editable planning assumption, not an automatic tax-law rate.
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%
%
KRW
Include management, repairs, property charges, insurance, and other cash costs.
x
The 1.5x default is a historical FSC non-housing reference, not a current statutory approval threshold.
3. Stress severity
Each step is accumulated once for caution, twice for severe, and three times for extreme.
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%p
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Scenario comparison
RTI tests interest coverage; cash flow also subtracts operating costs and first-year debt service.
Commercial mortgage results from base through extreme stress
Test whether a commercial mortgage can survive vacancy, not just whether it can close
A shop, office unit, or neighborhood retail building can look comfortably financed on closing day and still become cash-flow negative when one tenant leaves. Contract rent may fall during reletting, incentives may extend the empty period, and interest expense continues even while the unit produces no rent. A collateral value or quoted loan limit does not answer the practical question: how much debt can the property carry after vacancy, rent decline, operating costs, and a higher refinancing rate are considered?
This calculator answers that question through four linked scenarios. It calculates a rental-to-interest ratio, abbreviated RTI, and a separate cash-flow result. It then reverse-solves a planning loan limit under both tests, estimates break-even vacancy and interest rates, and shows the cash reserve required to absorb twelve months of the extreme-case deficit. The results are planning estimates, not a lender approval or a substitute for credit, collateral, legal, tax, or appraisal advice.
RTI coverage
Compare vacancy-adjusted rental income with first-year interest on both existing and requested debt secured by the property.
Cash-flow coverage
Subtract operating expenses and first-year principal as well as interest to see the annual and monthly cash surplus or deficit.
Stress capacity
Accumulate vacancy, rent-decline, and rate shocks to expose the binding loan limit and the reserve needed in a severe downturn.
The RTI formula used by this calculator
Annual rental income divided by annual interest expense
RTI = annual rental income ÷ annual interest on the same rental property. Annual rental income includes effective rent after rent decline and vacancy, imputed income on the security deposit, and other recurring rental income entered by the user. The denominator includes interest on the requested loan and interest on existing debt attached to the same building. Principal repayment and operating expenses do not enter this ratio, which is why RTI alone cannot describe spendable cash flow.
The separate cash-flow formula
Annual cash flow = annual rental income − operating expenses − existing debt service − first-year debt service on the requested loan. Existing debt service includes entered annual principal plus calculated interest. New-loan debt service follows the selected equal-payment, equal-principal, or interest-only schedule. A property can exceed the selected RTI target but still lose cash after repairs, owner-paid management costs, and principal amortization. Always read the ratio and cash-flow cards together.
How annual rental income is built
The model begins with total monthly contract rent and multiplies it by twelve. It applies the rent-decline percentage first and the vacancy percentage second. If annual contract rent is KRW 100,000,000, rent decline is 10%, and vacancy is 20%, effective rent is KRW 72,000,000: KRW 100,000,000 × 90% × 80%. The two percentages are not simply added. Separating them matters because a lower signed rent and a longer empty period represent different leasing risks and may require different responses.
Deposit income equals the security deposit multiplied by the user-entered annual deposit income rate. This is a financing-analysis assumption. It is not automatically tied to a Korean tax deemed-rent rate, and it should not be presented as such. Replace the default with the conversion rate recognized in the lender's preliminary review, if one is available. Other annual rental income should include only recurring property income that is likely to be recognized, not refundable deposits, value-added tax collected for remittance, or pass-through utility charges.
Contract rent is not always collected rent
Reconcile lease schedules with bank deposits, concessions, arrears, renewal dates, and tenant notices. If the seller quotes gross scheduled rent, remove amounts that are not recurring or have not actually been collected. A conservative starting input is more useful than a precise-looking result built on optimistic rent.
Model concentration, not only average vacancy
If one anchor tenant supplies 45% of rent, a market-average 10% vacancy assumption does not capture the main risk. Run a second calculation in which rent loss matches that tenant's share and the reletting period reflects the unit's size, fit-out, frontage, and permitted use.
Prepare the debt and purchase inputs carefully
Enter the purchase price and true equity contribution. The funding-gap result compares purchase price with equity plus the requested new loan. Acquisition tax, brokerage, registration, legal, renovation, and tenant-incentive costs are not automatically included. Add them to a separate closing budget even when the purchase-price gap is zero.
Identify debt that remains on the same property. Enter the outstanding balance, rate, and first-year principal of debt that will remain after closing. Set it to zero if the seller must discharge it. If a buyer assumes the loan as part of purchase funding, reconcile the calculator inputs with the settlement statement so the funding-gap interpretation remains accurate.
Select the actual repayment schedule. Equal-payment debt has a level monthly payment but changing interest and principal. Equal-principal debt starts with a higher payment and declines. Interest-only debt pays no principal during the modeled first year and leaves a balloon balance at maturity.
Use the proposed note rate, not a marketing minimum. Enter the rate from a written or recent preliminary quote. If the product resets, the stress-rate steps should cover plausible repricing before the next lease renewal or refinance date.
Avoid counting the same obligation twice. Existing annual principal is a cash-flow input, while existing interest is calculated from balance and rate. Do not add existing interest again to annual operating expenses.
Build an operating-cost estimate that can survive due diligence
Annual operating expenses should represent cash costs borne by the owner: property-related charges, insurance, common-area utilities, management, security, cleaning, ordinary repairs, leasing administration, and owner-paid service costs. If a roof, elevator, waterproofing system, facade, or major mechanical component will require periodic work, convert a reasonable replacement allowance into an annual reserve. Excluding irregular but predictable work makes a leveraged property appear safer than it is.
Commercial-property income and cost input treatment
Item
Suggested treatment
Common mistake
Monthly rent
Use collectible rent supported by leases and deposits.
Using the seller’s fully occupied headline rent.
Security deposit
Enter the refundable balance and a separate planning conversion rate.
Treating the entire refundable deposit as annual income.
Pass-through charges
Exclude amounts that merely reimburse utilities or are remitted.
Counting gross collections as owner income.
Repairs and reserves
Include ordinary costs and an annualized major-work reserve.
Assuming every future repair is paid by tenants.
Acquisition costs
Keep a separate closing and renovation budget.
Assuming a zero purchase funding gap means no cash is needed.
How the four stress levels work
The base case uses the entered vacancy, rent decline, and rates. Caution adds one step to vacancy, rent decline, and both existing and new-loan rates. Severe adds two steps, and extreme adds three. With the defaults, the cases move from 10% vacancy, 0% rent decline, and a 5% new-loan rate to 40% vacancy, 15% rent decline, and an 8% new-loan rate. These shocks follow the roadmap's requested comparison range of rate increases from one to three percentage points and vacancy increases from ten to thirty percentage points. They remain editable planning assumptions rather than regulatory values.
Does the current lease structure provide a workable margin?
Caution
20%
5%
6%
Can the property absorb one meaningful tenant or repricing shock?
Severe
30%
10%
7%
Will longer vacancy and lower renewal rent require owner support?
Extreme
40%
15%
8%
What debt reduction or cash reserve is needed for a prolonged shock?
Calibrate the steps to the property. Ask local brokers how long comparable units remained vacant, how much renewal rent changed, and which fit-out incentives were required. Review lease-expiry concentration and tenant credit. For floating-rate or near-maturity debt, compare the stress rate with an actual refinancing quote. The objective is not to choose a dramatic scenario; it is to make a plausible downside explicit before money becomes difficult to recover.
Worked example using the default assumptions
The default case assumes a KRW 1,200,000,000 purchase funded with KRW 500,000,000 of equity and a KRW 700,000,000 requested interest-only loan at 5%. Monthly contract rent is KRW 7,000,000, the security deposit is KRW 100,000,000, the deposit income rate is 2.5%, annual operating expenses are KRW 18,000,000, and base vacancy is 10%. There is no existing property debt in this example.
Base-case result
Annual rental income is KRW 78,100,000.
Annual interest is KRW 35,000,000.
RTI is 2.231429x, displayed as about 2.23x.
Annual cash flow is KRW 25,100,000.
Monthly cash flow is approximately KRW 2,091,667.
The binding RTI planning loan limit is KRW 1,041,333,333.
Extreme-case result
Vacancy reaches 40%, rent decline reaches 15%, and the rate reaches 8%.
Annual rental income falls to KRW 45,340,000.
RTI falls to 0.809643x, displayed as about 0.81x.
Annual cash flow becomes negative KRW 28,660,000.
The binding cash-flow planning loan limit is KRW 341,750,000.
The twelve-month stress buffer is KRW 28,660,000.
The base cash-flow break-even vacancy rate is 39.880952%, and the vacancy rate that preserves the selected 1.5x RTI target is 40.476190%. Holding base rental income constant, the new-loan cash-flow break-even rate is 8.585714%, equivalent to a 3.585714 percentage- point increase from the entered 5% rate. Those values are mathematical boundaries under the entered assumptions. Actual expenses can arrive unevenly, and a lender can recognize a different rent or interest amount, so do not manage liquidity exactly at the boundary.
Understand the reverse-solved planning loan limits
Each scenario produces two candidate limits. The RTI limit solves for the new-loan amount whose first-year interest keeps annual rental income at the selected target ratio after existing-property interest is deducted. The cash-flow limit solves for the new-loan amount whose first-year debt service can be paid after operating expenses, existing interest, and entered existing principal. The displayed planning loan limit is the smaller finite result. It identifies which of the two simplified operating tests binds first.
When RTI is binding
Interest consumes the ratio allowance before modeled operating cash becomes negative. Reducing requested debt or obtaining a lower rate directly improves the limit. A longer amortization period may improve cash flow but does not necessarily change first-year interest enough to solve an RTI shortfall.
When cash flow is binding
Operating expenses, existing principal, or new-loan amortization exhaust cash before the RTI target does. Review repair assumptions, repayment structure, purchase price, and debt amount. Do not remove real costs merely to make the result pass; that moves the deficit out of the model but not out of the bank account.
Read the break-even outputs as warning distances
Cash-flow break-even vacancy is the vacancy rate at which base-rate annual cash flow reaches zero after operating expenses and debt service. A displayed 0% can mean the property is already deficient even at full occupancy. No result is shown when contract rent is zero because vacancy no longer changes that income stream.
Target-RTI break-even vacancy is the vacancy rate at which RTI reaches the selected target using base rates. Compare it with the cash-flow break-even vacancy because principal and operating costs can make the cash boundary tighter or looser than the interest ratio boundary.
Cash-flow break-even new-loan rate raises the existing and requested rates by the same percentage-point shock until annual cash flow reaches zero. It holds rental income, vacancy, rent decline, and operating costs at their base values. It is a sensitivity result, not a rate forecast.
Twelve-month stress buffer equals the absolute annual deficit in the extreme case when that case is negative. It does not include acquisition costs, emergency capital work, tenant incentives, taxes not entered as operating expenses, or the balloon principal on interest-only debt.
Use the output in an acquisition or refinancing decision
Negotiate the purchase price
If the extreme planning limit sits far below the requested loan, test a lower purchase price before committing more equity. Use vacancy-adjusted cash flow rather than the seller's headline yield to explain the margin required for reletting and rate risk.
Compare amortization structures
Switch among equal-payment, equal-principal, and interest-only structures. A low first-year payment can improve current cash flow but create a larger maturity risk. Compare the balloon balance and likely refinancing terms outside the twelve-month view before accepting the easiest first-year result.
Set a reletting and reserve plan
Compare the calculated stress buffer with cash that will remain after closing. Add brokerage, fit-out support, free-rent periods, and emergency work to the reserve. Decide in advance which rent concession, partial lease, or principal reduction will be triggered if occupancy reaches the severe case.
Request lender pre-screening
Bring the rent roll, lease copies, collection evidence, expense ledger, property debt schedule, and scenario output. Ask which rents are recognized, how deposits are converted, what stress rate is used, how existing debt is treated, and whether the proposed amortization schedule matches the lender's calculation.
A practical due-diligence checklist
Match every occupied unit to a signed lease, deposit balance, monthly rent, expiry date, renewal option, and arrears record.
Separate value-added tax and pass-through management charges from income that is truly available for debt service.
Inspect tenant concentration by rent, floor area, business type, and lease expiry rather than relying only on building-wide vacancy.
Review permitted use, illegal alterations, fire and accessibility obligations, and fit-out requirements that can delay a replacement tenant.
Build an annual owner-cost schedule from actual invoices, property documents, insurance quotes, management statements, and a repair reserve.
Confirm whether existing liens are discharged, assumed, or subordinated and reconcile each balance with the closing funds flow.
Obtain proposed amount, rate, amortization, maturity, fees, covenants, and prepayment terms in writing before relying on a financing case.
Run at least one tenant-specific downside and one rate-reset downside in addition to the four standard scenario rows.
Keep liquidity outside the acquisition account so closing expenses do not consume the reserve intended for vacancy.
Recalculate after a material lease change, refinancing quote, appraisal update, or operating-cost discovery.
Frequently asked questions
Does an RTI above 1.5x guarantee approval?+
No. The 1.5x default is a historical non-housing reference and an editable planning target. A lender may use a different definition, threshold, recognized rent, stress rate, collateral value, borrower assessment, or product limit. The calculator cannot predict or promise approval.
Is the deposit income rate a Korean tax deemed-rent rate?+
Not automatically. It is a user-entered conversion assumption for this financing analysis. Tax deemed-rent rules and lender recognition methods serve different purposes and can use different rates and bases. Replace it with the rate stated by the reviewing lender or use zero when uncertain.
Should management charges and VAT be included in monthly rent?+
Exclude amounts that the owner collects only to pay utilities, service providers, or tax authorities. Include owner-paid common costs in annual operating expenses. Use a consistent net-income view and ask the lender which documents and income categories it recognizes.
Why can RTI pass while cash flow fails?+
RTI uses interest expense in its denominator. Cash flow also subtracts principal and operating expenses. An amortizing loan, high repairs, existing principal, or owner-paid costs can therefore create a cash deficit even when rental income comfortably exceeds interest.
What does a 0% break-even vacancy result mean?+
It means the tested condition is not met even at full occupancy under the entered rent decline, rates, operating costs, and debt schedule. Review debt amount, purchase price, rent evidence, operating costs, and structure instead of treating zero as additional vacancy capacity.
Why is a break-even vacancy unavailable when contract rent is zero?+
Vacancy cannot change a zero contract-rent stream, so there is no meaningful vacancy boundary to solve. Deposit income and other rent may still produce cash, but changing vacancy will not affect that result until contract rent is entered.
Does the planning loan limit include LTV?+
No. It is the smaller of an RTI-derived limit and a cash-flow-derived limit. Collateral recognition, regional restrictions, borrower classification, DSR, internal lender policy, appraisal adjustments, and product caps may reduce actual lending below the displayed amount.
How is existing property debt handled?+
Existing interest is calculated from the entered balance and stressed rate and enters both RTI and cash flow. Entered existing annual principal enters cash flow only. Existing debt is also included in total debt divided by purchase price, but the purchase funding gap uses equity and the requested new loan.
What happens with a zero-rate interest-only loan?+
Annual interest and first-year principal are both zero, so RTI and per-won reverse limits are mathematically undefined rather than infinite approvals. The interface reports that they cannot be calculated. A real zero-rate arrangement may still have fees, maturity principal, and other conditions outside this model.
How often should I rerun the analysis?+
Rerun it when a lease expires or is amended, a tenant falls behind, a unit becomes vacant, a large repair is identified, the lender changes its quote, or refinancing approaches. The model is most valuable as a living risk check, not a one-time closing document.
Official sources and the 2026 scope
The Financial Services Commission release of October 22, 2018 describes the annual rental-income-over-interest formula and the historical 1.5x non-housing reference. The source is available from the official FSC website.
The current Banking Supervision Regulation record checked on August 15, 2026 has official serial number 2100000276094, administrative-rule ID 21829, notice 2026-10, and an effective date of April 1, 2026.
The current Banking Supervision Detailed Enforcement Rules record checked on August 15, 2026 has official serial number 2200000108789, administrative-rule ID 2041117, and an effective date of June 30, 2026.
Searches of those current texts did not identify a universal RTI term or statutory ratio applied to every commercial mortgage. That absence supports the calculator's explicit distinction between a historical reference and current lender-specific underwriting, but it does not prove that no institution uses RTI internally.
Source verification reflects the official materials available on August 15, 2026. Regulations, supervisory guidance, lender policy, interest rates, and underwriting practice can change. Confirm current treatment with the relevant financial institution and qualified advisers before signing a purchase, security, or loan agreement.
Limits of the model
All scenarios are deterministic and use the values entered; they are not market forecasts or probability estimates.
Rent decline and vacancy are applied uniformly to contract rent and do not model unit-by-unit lease timing.
Deposit income and other rent remain constant across stress levels unless the user changes the underlying inputs.
New-loan first-year debt service uses a monthly schedule, while entered existing principal is an annual amount.
Interest-only modeling leaves principal outstanding and does not automatically reserve cash for the maturity balloon.
The rate break-even test shocks existing and new-loan rates by the same percentage-point amount while holding rental income constant.
Negative funding gap means entered equity and requested loan exceed purchase price; it does not mean excess cash is safely distributable.
Taxes, transaction costs, renovation, leasing commissions, free-rent incentives, refinancing fees, and emergency capital expenditures require separate budgeting unless included in operating expenses.
The model does not determine legal classification, lender eligibility, collateral enforceability, tax treatment, or accounting presentation.
Start with the scenario that is hardest to accept
If the extreme case requires more cash than you can reserve or supports materially less debt than requested, change the purchase price, equity, loan structure, or leasing plan before the contract removes those choices. Then take the assumptions and supporting rent documents to the lender for a current, property-specific pre-screening.