DSCR Calculator (Debt Service Coverage Ratio)
Work out the debt service coverage ratio (DSCR) on an investment property loan. Enter the net operating income and your annual or monthly debt service to see the DSCR and whether it clears the typical 1.25 threshold.
How to calculate DSCR
- Enter the annual net operating income (rent collected minus operating expenses).
- Enter the annual debt service, or switch to monthly and enter the payment.
- Read the DSCR and check whether it meets the common 1.25 minimum.
Examples
60,000 NOI against 48,000 of debt service
Net operating income 60,000, annual debt service 48,000
DSCR 1.25
Frequently asked questions
What is the debt service coverage ratio?
DSCR is the net operating income of a property divided by its annual debt service (loan payments). It shows how comfortably the income covers the loan. A DSCR of 1.25 means income is 1.25 times the payments.
How is DSCR calculated?
Divide the annual net operating income by the annual debt service. For example, 60,000 of NOI against 48,000 of yearly loan payments gives a DSCR of 1.25.
What DSCR do lenders want?
Many investment-property lenders look for a DSCR of at least 1.25, meaning income exceeds the loan payments by 25 percent. Some allow lower ratios at higher rates, and a DSCR below 1.0 means income does not cover the debt.
What is debt service?
Debt service is the total of principal and interest payments on the loan over a year. If you only know the monthly payment, multiply it by 12, or enter the monthly figure and the calculator does it for you.
Does DSCR include operating expenses?
Yes, indirectly. DSCR uses net operating income, which is gross rent minus operating expenses such as taxes, insurance, maintenance and management. It does not subtract the loan payments themselves, since those are the debt service.
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