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DSCR

Does net operating income cover the annual mortgage by the ratio a DSCR lender wants?

Your numbers

DSCR

1.45

Annual debt service$24,906
NOI cushion above debt$11,094

Tip. Educational estimate with the assumptions listed on this page. Not tax, legal, or investment advice.

Assumptions

  • Payment is P&I only. Taxes and insurance in NOI should already be expensed.
  • Interest-only DSCR loans would show a higher ratio; this uses full amortization.
  • Lender haircuts to income are not applied.

Explore the numbers

Examples

Load a scenario, then change one input at a time.

Example 1

Clears 1.20

$36k NOI on $320k at 6.75%.

DSCR

1.45

Example 2

Fails

Same loan, weaker NOI.

DSCR

0.96

Example 3

Rate shock

7.75% money.

DSCR

1.31

What this calculates

Estimate debt-service coverage ratio from annual NOI and an amortizing loan's principal-and-interest payment.

How to use it

  1. Many DSCR programs want 1.0 to 1.25. If you are at 0.95, the file is fragile.
  2. Rebuild NOI from leases, not the broker OM.
  3. Raise rate 100 bps and see if the ratio still clears.

Common mistakes

  • Using gross rent instead of NOI.
  • Comparing to a 1.25 requirement with an interest-only quote you will not keep.
  • Ignoring impounds that do not sit in NOI.

Formula

DSCR = annual NOI ÷ (monthly P&I × 12).

FAQ

What DSCR do lenders want?

It varies. 1.0 is a common floor; 1.25 is a healthier file. Ask the actual program.

Does this include taxes and insurance?

They should already be in NOI as expenses. Do not subtract them again from debt service unless your lender uses PITIA in the denominator.

STR income?

Lenders often haircut it. Use a lower NOI.

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