DSCR Calculator

The debt service coverage ratio measures whether a property generates enough income to cover its loan payments. Divide the net operating income by the annual debt service, and the result tells you how many times over the property can pay its debt. A DSCR of 1.25x means the property produces 25% more income than required to service the loan.

A DSCR below 1.0 means the property does not generate enough income to cover debt payments. That is a non-starter for most conventional financing. Between 1.0x and 1.20x, the deal may still get done with additional recourse, reserves, or a lower loan amount. Above 1.25x, you are in a comfortable range for most lenders.

Worked example: A property generates $750,000 in annual NOI. The loan has a $540,000 annual debt service (monthly payments of $45,000). DSCR = $750,000 / $540,000 = 1.39x. This means the property earns 39% more than it needs to cover debt payments.

If you do not know the annual debt service, you can calculate it from the loan terms: take the loan amount, interest rate, and amortization period to compute the monthly mortgage payment, then multiply by 12. The calculator above does this automatically when you switch to the "Calculate from loan terms" mode.

Different lenders and loan programs have different minimum DSCR requirements. Here are the typical thresholds:

Standard DSCR only considers the subject property's income and debt. Global DSCR includes all income sources and all debt obligations of the borrower, including other properties, personal guarantees, and business loans.

Bank lenders and SBA programs frequently use global DSCR. If a borrower has strong personal income or cash flow from other properties, global DSCR may exceed the property-level DSCR, making the deal easier to finance. Conversely, if the borrower has significant other obligations, global DSCR may be lower than the property-level number.

If your DSCR falls short of lender requirements, there are three ways to improve it:

• Increase NOI. Raise rents to market, reduce vacancy through better leasing, or cut operating expenses. Even small improvements compound: a 5% increase in NOI directly increases DSCR by 5%.
• Reduce debt service. Negotiate a lower interest rate, request a longer amortization period (30 years vs 25), or add an interest-only period. Each of these lowers the denominator. Compare loan structures to see the impact.
• Reduce loan amount. Contributing more equity reduces the loan and therefore the debt service. This is the most direct lever but requires more capital.

Every lender underwrites DSCR differently. Some use trailing 12-month NOI. Some use a stabilized projection. Some haircut income or gross up expenses. When you are comparing three or four term sheets on the same deal, the quoted DSCR can mean different things depending on the lender's assumptions. Tracking each quote alongside its underwritten NOI and calculated DSCR in a single view is how teams identify the best structure, not just the lowest rate.

MotionCRE's financing tracker lets you compare lender quotes side-by-side on every deal, with DSCR calculated automatically from the terms.