1.02
Positive, but below typical lender minimum
0.0012.00+
Net Operating Income
$44,000
Total Debt Service
$43,168
DSCR
1.02
Your DSCR clears the typical 1 lender minimum, with a $832 (2%) annual cushion above your debt payments.
$
Rental income minus operating expenses, before debt payments
$
Original or remaining mortgage balance
%
Annual interest rate
years
Length of the loan
Estimated total debt service (principal + interest): $43,168 per year ($3,597/month)
A DSCR of 1.02 means for every $1.00 of debt service, you have $1 of net operating income available to cover it, a $832 annual cushion above your debt payments.
- What is Debt Service Coverage Ratio (DSCR)?
- DSCR is a property's (or business's) Net Operating Income divided by its Total Debt Service, the total annual loan payments due. A property generating $60,000 in NOI with $48,000 in annual debt payments has a DSCR of 1.25.
- It tells you how many times over the income covers the debt payments. A DSCR of 1.25 means income covers debt payments 1.25 times, with a 25% cushion left over.
- Is a higher or lower DSCR better?
- Higher is better. A DSCR of 1.5 means income covers debt payments with a much larger buffer than a DSCR of 1.05, which is barely covering the loan.
- A DSCR below 1.0 means the property's income doesn't cover its debt payments at all, the owner would need to cover the shortfall from other funds.
- What DSCR do lenders typically require?
- It varies by lender and loan type, but 1.20 to 1.25 is a common minimum for investment property and commercial loans. Some lenders require 1.35 or higher for riskier property types or borrowers.
- A higher required DSCR gives the lender more of a buffer if income drops or expenses rise, which is why riskier loans typically come with a higher minimum.
- What is included in Total Debt Service?
- Total Debt Service generally means the total annual principal and interest payments on a property's debt. Some lenders also fold in other required payments, like mortgage insurance, into the figure.
- It does not include operating expenses like taxes, insurance, or maintenance, those are already subtracted out when calculating Net Operating Income.
Track your properties in your portfolio
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