Calculate your debt service coverage ratio
Total rental or business income
Taxes, insurance, maintenance, management
Total annual mortgage or loan payments
DSCR Ratio
0.00
Status: Calculating...
Net Operating Income
$0.00
Debt Service
$0.00
Cash Flow
$0.00
Margin
0%
DSCR Assessment
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DSCR, or Debt Service Coverage Ratio, is a financial metric that measures an entity's ability to cover its debt obligations using its operating income. It's calculated by dividing net operating income (NOI) by total debt service (principal + interest payments).
DSCR is one of the most important metrics used by lenders to evaluate loan applications, particularly for commercial real estate and business loans. It shows whether a property or business generates sufficient income to cover its debt payments with a margin of safety.
A DSCR of 1.0 means income exactly equals debt payments—no margin for unexpected expenses or income fluctuations. A DSCR above 1.0 indicates positive cash flow, while below 1.0 means the entity cannot cover its debt from current income.
Calculating DSCR involves three steps:
DSCR = Net Operating Income ÷ Total Debt Service
NOI = Gross Income − Operating Expenses
Total Debt Service = Annual Principal + Interest Payments
Cash Flow = NOI − Debt Service
Margin = (NOI − Debt Service) ÷ NOI × 100
Rental property with $100,000 income, $40,000 expenses, and $45,000 debt payments:
| Gross Income | $100,000.00 |
| Operating Expenses | −$40,000.00 |
| Net Operating Income | $60,000.00 |
| Debt Service | $45,000.00 |
| Cash Flow | $15,000.00 |
| DSCR | 1.33 |
DSCR interpretation varies by loan type and lender requirements:
| DSCR Range | Assessment |
|---|---|
| 1.50+ | Excellent - Strong cash flow, easily qualifies |
| 1.25 - 1.49 | Good - Standard for most lenders |
| 1.10 - 1.24 | Fair - Limited options, higher rates |
| 1.00 - 1.09 | Poor - Barely covers debt, high risk |
| Below 1.00 | Critical - Cannot cover debt from income |
DSCR is especially important for rental property investors. Lenders use DSCR to determine whether the property's rental income will cover the mortgage payments. This is the foundation of DSCR loans—mortgages that qualify based on property cash flow rather than personal income.
For rental properties, DSCR is calculated using the property's actual or projected rental income minus operating expenses (property taxes, insurance, maintenance, property management, vacancy allowance) divided by the mortgage payment.
Most DSCR lenders require a ratio of 1.0 to 1.25 for rental properties. A DSCR of 1.25 means the property generates 25% more income than needed for mortgage payments, providing a cushion for vacancies, repairs, or rent reductions.
DSCR loans are non-qualified mortgages (non-QM) that qualify borrowers based on the property's cash flow rather than personal income. Requirements vary by lender but typically include: