DSCR Loan Calculator
DSCR Calculation Results
Net Operating Income (NOI):
Annual Debt Service:
DSCR:
Loan Eligibility:
Required DSCR Not Met (Minimum )
Maximum Loan Amount:
Error
About DSCR Loans and How to Calculate Debt Service Coverage Ratio
The Debt Service Coverage Ratio (DSCR) is a critical financial metric used by lenders to assess the cash flow of income-producing properties and determine loan eligibility. Our DSCR calculator helps real estate investors quickly evaluate their property's financial performance.
Key Concepts in DSCR Calculation:
- Net Operating Income (NOI): Annual property income minus operating expenses (excluding financing costs)
- Debt Service: Total annual mortgage payments including principal and interest
- DSCR Formula: NOI ÷ Debt Service = Debt Service Coverage Ratio
Understanding DSCR Values:
- • DSCR > 1.0: Property generates sufficient income to cover debt payments
- • DSCR < 1.0: Property income is insufficient to cover debt obligations
- • Most commercial lenders require minimum DSCR of 1.20-1.25 for loan approval
- • Higher DSCR values (1.5+) indicate stronger cash flow and lower risk
Practical DSCR Calculation Example:
Consider a rental property with:
• $120,000 annual rental income
• $20,000 annual operating expenses
• $80,000 annual mortgage payments
NOI = $120,000 - $20,000 = $100,000
DSCR = $100,000 ÷ $80,000 = 1.25
This property meets typical lender requirements with a 1.25 DSCR.
How to Improve Your DSCR:
- • Increase property income through rent adjustments or additional revenue streams
- • Reduce operating expenses through cost-saving measures
- • Consider a larger down payment to reduce loan amount
- • Negotiate better loan terms (lower interest rate or longer term)