NOI is operating income before debt. DSCR = NOI ÷ annual debt service.
Calculation details
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What does this calculator estimate?
The debt-service coverage ratio measures how well a property's operating income covers its annual mortgage payments. It's the primary underwriting metric commercial lenders use to decide loan size and risk. Enter net operating income and annual debt service to get yours.
- DSCR = NOI ÷ annual debt service
- Lender underwriting metric
- ≥1.25 is the common comfort band
What DSCR tells lenders
The debt service coverage ratio is the lender's core check: does the property's income cover the loan? At 1.0, income exactly equals debt service; at 1.25, there's a 25% cushion. Most commercial lenders require 1.0–1.25 for rental properties.
Limitations to watch for
The ratio uses NOI, which excludes financing — exactly the point, since it measures the property's ability to carry debt. Vacancy and expense estimates feed the NOI, so conservative inputs matter. The tool uses annual totals; monthly works the same.
How to use it in practice
Enter the property's NOI (or compute it first) and the annual mortgage payment. If DSCR is below the lender's threshold, raise rents, cut costs, or put down more. Use it to price what a property can support in financing.
['Enter the net operating income.', 'Enter the annual debt service.', 'Read the DSCR and coverage cushion.']
What DSCR measures
Debt service coverage ratio is net operating income divided by total debt payments (principal and interest). A property with $15,000 annual NOI and $10,000 in debt service has a 1.50 DSCR — 50 percent more income than the payments need. Lenders use it to judge whether a property can carry its debt.
Why lenders require a minimum
Commercial and investment-property lenders typically want a DSCR of at least 1.20 to 1.25, sometimes 1.30 or higher for riskier deals. Below 1.0, the property does not generate enough income to cover payments, and the borrower must cover the gap from other funds. The calculator flags these zones.
NOI vs. cash flow
DSCR uses net operating income — before financing but after operating expenses. Cash flow after debt service is a different number that includes the mortgage. A 1.50 DSCR means the property covers payments 1.5 times over; the actual cash left after payments is the surplus investors care about.
A worked example
A four-unit building rents for $4,000 monthly with $1,500 in monthly expenses: NOI is $30,000 annually. With $18,000 in annual debt service, DSCR is 1.67. Raising rents by 5 percent lifts NOI to $31,800 and DSCR to 1.77 — the calculator makes the sensitivity visible.
Using DSCR to size a loan
Working backward, a lender allows debt service up to NOI ÷ minimum DSCR: at 1.25, $30,000 NOI supports $24,000 of annual payments — about a $280,000 loan at 6.5 percent over 20 years. The calculator's forward and reverse views help you see what a property can borrow.
How this calculator works
Formula
DSCR = net operating income ÷ annual debt service. It measures whether a property's income covers its mortgage payments.
Worked example
$15,000 annual NOI with $10,000 annual debt service: DSCR = 1.50 — income covers the mortgage 1.5×.
Assumptions to verify
- NOI and debt service are annual totals.
- The mortgage is the property's only debt.
- Income and expenses are stable.
Frequently asked questions
What is DSCR?
Net operating income divided by annual debt service: $15,000 ÷ $10,000 = 1.50.
How is it calculated?
NOI ÷ annual mortgage payments (principal + interest).
What DSCR do lenders require?
Usually 1.0–1.25+ for rental properties — the higher the cushion, the safer the loan.
What does 1.0 mean?
Income exactly covers the mortgage — no cushion for vacancies or repairs.
How do I improve DSCR?
Raise rents, cut operating expenses, or reduce the loan (bigger down payment, lower rate).
Is this for residential or commercial?
Both — it's standard underwriting for any income-producing property.
What if my DSCR is below 1.0?
The property doesn't cover its own debt — the borrower must cover the gap, which most lenders reject.
What is a good DSCR?
Lenders typically require 1.20–1.30; below 1.0 means the property can't cover its payments.
How do I calculate DSCR?
Net operating income ÷ total debt payments.
Does DSCR include the mortgage?
It compares NOI (before financing) to debt service — the mortgage is the denominator.
What happens if DSCR is below 1.0?
The borrower must cover the shortfall; lenders rarely approve that scenario.
Cite this tool
BoringToolsKit. “DSCR Calculator.” boringtoolskit.com/debt-service-coverage-ratio-calculator/ (reviewed 2026-08-25). Free to reference in articles, syllabi, and answer posts with a link.
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