Calculate the Debt Service Coverage Ratio to assess your ability to service debt from property income.
DSCR = NOI / Annual Debt Service
The debt service coverage ratio (DSCR) measures whether the NOI you enter covers the annual debt service you enter. A ratio of 1.25 means NOI is 1.25 times that debt service. This page does not quote a lender minimum.
For the definition, see the DSCR glossary entry. Debt service is one year of principal and interest, not the loan balance. A ratio of 1.00x means NOI equals debt service. Ask the lender what minimum they require for this loan. The loan payment calculator turns a balance, rate, and term into that annual debt service. This page does not add a pass or fail label.
DSCR = Net Operating Income / Annual Debt ServiceAnnual debt service includes all principal and interest payments on the mortgage over 12 months. If a property generates $180,000 in NOI and the annual mortgage payments total $144,000, the DSCR is 1.25x. Every dollar above 1.0x represents a cushion that protects the lender if income drops.
This page does not store a lender minimum. Ask the lender for the ratio in the term sheet, then enter that NOI and debt service here.
A ratio below 1.0 means the NOI you entered is smaller than the annual debt service you entered. The shortfall is the difference. A loan document may set its own covenant. This page does not quote one.
Rearrange the formula: maximum annual debt service equals NOI divided by the coverage ratio you choose. This page does not choose that ratio for you.
No. DSCR compares NOI to debt service payments. Debt yield compares NOI to the total loan amount (NOI / Loan Amount). Debt yield is a simpler metric that doesn't depend on interest rate or amortization period. CMBS lenders often use both metrics.