DSCR
Debt service coverage ratio
DSCR is net operating income divided by annual debt service. At 1.00 the property exactly covers its own mortgage; above that there is a margin. It is the metric a commercial or DSCR-loan underwriter cares about most, because it measures the property's ability to pay the loan without the borrower's paycheque.
DSCR = NOI ÷ annual debt service
Worked example
$19,310 of NOI against $15,469 of annual payments is a DSCR of 1.25 — right at the floor most lenders quote.
Rental metric examples use the default $265,000 duplex at $2,650 monthly rent, 25% down and 6.75% over 30 years. Strategy and tax examples use the assumptions stated above rather than that rental deal.
The mistake to avoid
Where this is calculated
The dscr calculator computes this from your own numbers and shows the arithmetic expanded. Debt service coverage ratio against real lender thresholds, plus the loan amount your NOI will actually support.
Related terms
- Loan-to-valueLoan-to-value is the loan balance divided by the property's appraised value.
- Debt serviceDebt service is the total of principal and interest paid on the loan over a year.
- Seller financingSeller financing is when the seller acts as the bank: you pay a down payment and sign a promissory note secured by the property, then pay the seller monthly.
Back to the full glossary — 21 terms with formulas and worked examples.