Debt Service Coverage Ratio Calculator
Calculate the Debt Service Coverage Ratio (DSCR) for a commercial or residential investment property. Lenders use this metric to determine whether a property's income is sufficient to cover its loan payments.
About this calculator
The Debt Service Coverage Ratio (DSCR) measures how many times a property's net operating income covers its annual debt obligations. The formula is: DSCR = Net Operating Income / Annual Debt Service. Net Operating Income is gross income minus operating expenses (excluding debt payments). Annual Debt Service is the total of all principal and interest payments due in a year. A DSCR of 1.0 means the property earns exactly enough to cover its debt — no cushion. Most commercial lenders require a minimum DSCR of 1.20 to 1.25, meaning the property must earn 20–25% more than its debt payments. A DSCR above 1.5 is considered strong, while anything below 1.0 indicates negative cash flow and poses significant default risk. DSCR is one of the primary underwriting metrics for commercial real estate loans.
How to use
You're applying for a commercial loan on a property with $120,000 in annual NOI. Your proposed mortgage requires annual payments of $90,000 (principal + interest). DSCR = $120,000 / $90,000 = 1.33. This means the property generates $1.33 for every $1.00 of debt obligation — comfortably above the typical 1.25 lender threshold. If your NOI dropped to $85,000, your DSCR would fall to 0.94, likely disqualifying you for the loan without a larger down payment or restructured terms.
Frequently asked questions
What DSCR do lenders require for a commercial real estate loan?
Most conventional commercial lenders require a minimum DSCR of 1.20 to 1.25, though requirements vary by lender, loan type, and property class. SBA loans often require at least 1.25, while some portfolio lenders may accept 1.15 for strong borrowers. DSCR-based (non-QM) residential investment loans typically require a minimum of 1.0 to 1.25 depending on the product. The higher your DSCR, the more negotiating power you have on rate and terms.
How does DSCR affect my ability to qualify for a real estate investment loan?
DSCR-based loans qualify the borrower based on the property's income rather than the borrower's personal income, making them popular with self-employed investors and those with complex tax returns. If your property's DSCR meets the lender's minimum threshold, you may qualify even with lower personal income documentation. A DSCR below the required minimum typically means you must either increase the NOI, reduce the loan amount (larger down payment), or find a lender with more flexible guidelines.
What is the difference between DSCR and debt-to-income ratio?
DSCR is a property-level metric — it compares the property's NOI to its debt payments, used primarily in commercial and investment property lending. Debt-to-income (DTI) ratio is a borrower-level metric — it compares your total personal monthly debt payments to your gross monthly income, used in residential mortgage underwriting. For owner-occupied homes, lenders focus on DTI; for investment properties and commercial loans, DSCR takes center stage. Strong DSCR can sometimes compensate for a higher personal DTI in investment property scenarios.