Debt Service Coverage Ratio (DSCR) Calculator
Calculate DSCR to determine if a property's income covers its debt obligations — required by most commercial lenders.
How to use this tool
- Enter net operating income (noi) and annual debt service in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your dscr and the full breakdown beneath it.
DSCR above 1.0 means the property generates enough income to cover its debt. Most lenders require DSCR of at least 1.20–1.25 for investment property loans.
Formula
DSCR = Net Operating Income (NOI) ÷ Annual Debt Service
Annual Surplus / Deficit = NOI − Annual Debt Service
How it works
The Debt Service Coverage Ratio (DSCR) measures how many times a property's net operating income covers its total annual mortgage payments (principal and interest). A DSCR above 1.0 means income exceeds debt obligations; most commercial lenders require a minimum DSCR of 1.20–1.25.
This calculator divides NOI by annual debt service and also shows the absolute dollar surplus or deficit. It assumes NOI and debt service figures are entered accurately and does not model vacancy, capital expenditures, or future rate changes on variable-rate loans.
Worked example
Worked example
- NOI: $18,000/yr | Annual debt service: $14,400/yr
- DSCR = $18,000 ÷ $14,400 = 1.25×
- Annual surplus = $18,000 − $14,400 = $3,600
DSCR: 1.25× | Annual surplus: $3,600
Key terms
- Net Operating Income (NOI)
- Gross rental income minus vacancy loss and operating expenses (excluding mortgage payments and income taxes).
- Annual debt service
- The total of all principal and interest payments made on a property's mortgage over one year.
- DSCR threshold
- The minimum DSCR required by a lender, typically 1.20–1.25×, meaning income must exceed debt payments by at least 20–25%.
- Surplus / Deficit
- The dollar amount by which NOI exceeds (surplus) or falls short of (deficit) total annual debt service.
Frequently asked questions
- What DSCR do lenders require?
- Most commercial and DSCR mortgage lenders require a minimum DSCR of 1.20 to 1.25. A DSCR below 1.0 means the property operates at a loss after debt payments.
- How do I improve my DSCR?
- Increase NOI (raise rents, reduce vacancies, cut expenses) or reduce debt service (larger down payment, better interest rate, longer amortization period).