Debt Service Coverage Ratio (DSCR) Calculator

Calculate your debt service coverage ratio instantly to assess loan eligibility for commercial real estate, business loans, and investment properties. This professional tool helps lenders evaluate your ability to service debt.

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DSCR Analysis Results

Your Debt Service Coverage Ratio
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Enter values to calculate

Lender Interpretation

A DSCR of 1.25 or higher is typically required by commercial lenders[citation:1]. Ratios below 1.0 indicate insufficient cash flow to cover debt payments.

Net Operating Income (NOI)
$0
Annual Debt Service
$0
Monthly Payment
$0
Lender Assessment
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DSCR Formula & Calculation Methodology

DSCR = Net Operating Income (NOI) ÷ Annual Debt Service[citation:1][citation:4]

Step-by-Step Calculation:

  1. Calculate Net Operating Income (NOI): Gross Income × (1 - Vacancy Rate) - Operating Expenses
  2. Calculate Annual Debt Service: Total annual principal and interest payments on the loan
  3. Divide NOI by Annual Debt Service to get the DSCR ratio
Professional Insight: Most commercial lenders require a minimum DSCR of 1.25x[citation:1]. Some lenders may calculate a "Global DSCR" that includes the borrower's personal income and debts in addition to the property's financials[citation:1].

Practical Example & Scenario Analysis

Example: Commercial Property Investment

Property Details: Small apartment building with $120,000 annual gross rental income.

Analysis: With a DSCR of 1.88, this property generates $1.88 for every $1 of debt payment, indicating strong cash flow and high likelihood of loan approval.

Professional Considerations for DSCR Loans

Down Payment Requirements

DSCR loans typically require higher down payments than conventional mortgages. The down payment is usually 20% or above[citation:4]. A lower down payment results in higher monthly payments, which can negatively impact your DSCR.

1.0 DSCR
Break-even
1.25 DSCR
Minimum Standard[citation:1]
1.50 DSCR
Strong Position
>2.0 DSCR
Excellent

Frequently Asked Questions (FAQ)

What is a good DSCR ratio?

A DSCR of 1.25 is generally considered the minimum acceptable by most lenders[citation:1][citation:4]. However, higher ratios (1.5+) are preferred as they indicate stronger cash flow and lower risk.

How much down payment is needed for a DSCR loan?

DSCR loans typically require a down payment of 20% or more[citation:4]. The exact amount depends on the lender, property type, and borrower's financial strength.

What does a 1.50 DSCR mean?

A DSCR of 1.50 means the property generates $1.50 in net operating income for every $1 of debt payment. The extra $0.50 provides a cushion for unexpected expenses or vacancies[citation:4].

Can I get a DSCR loan with a ratio below 1.25?

It's challenging but possible with compensating factors like strong personal finances, additional collateral, or a larger down payment. Some lenders may consider ratios as low as 1.15 for exceptionally strong borrowers.

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