DSCR Loan Calculator
Calculate the debt service coverage ratio (DSCR) from NOI and annual debt service, see the qualification band, and the surplus cash flow.
How to use this tool
- Enter the property's annual net operating income (NOI).
- Enter the total annual mortgage payment (principal + interest).
- Read the DSCR and the lender qualification band.
- Check the cash flow remaining after debt service.
- Aim for 1.20-1.25 or higher for most DSCR loan programs.
DSCR lenders underwrite the property's cash flow, not your paycheck. Enter NOI and annual debt service to get the ratio, the qualification band, and the surplus cash flow left after the mortgage.
Formula
The debt service coverage ratio compares income to debt obligations:
DSCR = NOI ÷ Annual debt service
Cash flow after debt = NOI − Annual debt service
A DSCR of 1.0 means income exactly covers the loan payments. Most DSCR lenders require 1.20–1.25 so the property carries a cushion.
How it works
DSCR loans qualify the property, not the borrower's personal income, which is why they are popular for rental investors. The lender asks one question: does the asset's net operating income comfortably cover its mortgage payments? The answer is the debt service coverage ratio — NOI divided by annual principal-and-interest payments.
A DSCR of exactly 1.0 is break-even; the rent covers the loan with nothing to spare. Lenders dislike that, because a single vacancy or repair pushes coverage negative. Most DSCR programs require 1.20 to 1.25, and the strongest pricing goes to ratios well above that. A ratio below 1.0 means the property cannot service its own debt and the shortfall must be covered out of pocket.
Reviewed by the AbraCalc Real Estate Desk. Use the lender's definition of NOI and confirm whether taxes, insurance, and HOA are in the debt-service figure. This calculator provides general information, not investment advice; verify figures and assumptions against your own underwriting before acting.
Worked example
$60,000 NOI, $48,000 annual debt service
- DSCR = $60,000 ÷ $48,000 = 1.25.
- Cash flow after debt = $60,000 − $48,000 = $12,000.
- 1.25 meets the common 1.25 threshold, so the band is Strong.
DSCR 1.25x | Annual cash flow after debt $12,000.00 | Strong (>=1.25)
DSCR for $60,000 NOI at various annual debt-service levels
| Annual debt service | DSCR | Band |
|---|---|---|
| $40,000 | 1.50 | Strong |
| $48,000 | 1.25 | Strong |
| $52,174 | 1.15 | Tight |
| $60,000 | 1.00 | Tight |
Key terms
- DSCR
- Debt service coverage ratio — NOI divided by total annual debt service.
- Debt service
- The total annual mortgage payment: principal plus interest (and sometimes escrowed taxes and insurance).
- DSCR loan
- A mortgage underwritten on the property's cash flow rather than the borrower's personal income.
- Coverage cushion
- The margin above 1.0 DSCR; the buffer protecting the lender if income dips or expenses rise.
Frequently asked questions
- What DSCR do lenders require?
- Most DSCR loan programs require a ratio of 1.20 to 1.25, meaning NOI is 20-25% larger than the annual mortgage payment. Some allow as low as 1.0, and a few permit sub-1.0 with reserves, but pricing worsens as the ratio drops.
- Is DSCR calculated before or after the mortgage?
- DSCR uses NOI, which is computed before the mortgage. The ratio then divides that NOI by the annual debt service, so it is measuring exactly how well pre-debt income covers the loan.
- What does a DSCR below 1.0 mean?
- It means the property's income does not cover its loan payments. The owner must subsidize the shortfall from other funds. Lenders generally decline or heavily reserve these loans.