What DSCR do lenders require?

It varies by lender, country and program, many commercial and investment lenders look for roughly 1.20–1.25 or better, but thresholds are set per loan product. Always confirm with the actual lender.

Is a DSCR above 1.0 enough?

Mathematically the loan is covered, but there is no cushion. A 1.01 DSCR breaks on the first surprise vacancy. Higher coverage means resilience.

How is DSCR different from cash-on-cash return?

DSCR compares property income to the loan (lender's view). Cash-on-cash compares your cash income to your cash invested (investor's view). A deal can pass one test and fail the other.

Financing · Formula v1.0.0

DSCR Calculator

Debt Service Coverage Ratio = NOI ÷ annual debt service, the lender's core test of whether income can carry the loan.

Currency (display only)

Your inputs

Net operating income (annual)

Income after operating expenses, BEFORE mortgage payments.

Annual debt service

Total mortgage payments (P&I) for one year.

DSCR

1.29

1.2–1.5, comfortable territory; many lenders look for at least ~1.20–1.25 on investment property loans (requirements vary by lender, country and loan program).

Net operating income (NOI): $54,000
Annual debt service: $42,000
Debt Service Coverage RatioNOI ÷ annual debt service: 1.29
Coverage surplus / shortfallIncome left after loan payments: $12,000
Income cushion per $1 of debtExtra income generated for each $1 of loan payments: $0.29
Max debt service at 1.25 coverageNOI ÷ 1.25, the largest annual payment that keeps DSCR at 1.25: $43,200

How the DSCR works

The Debt Service Coverage Ratio asks one question: for every dollar of loan payments due this year, how many dollars of property income arrive? A DSCR of 1.25 means $1.25 of NOI per $1.00 of debt service.

Lenders use it to size investment loans because it tests the property, not the borrower's personal salary, for repayment capacity. DSCR-based products exist in several countries under different names.

The calculator also shows the coverage surplus or shortfall in real money, and the maximum debt service that would keep coverage at 1.25, useful for reverse-engineering loan sizing.

Formula & terms

DSCR = Net Operating Income ÷ Annual Debt Service

NOI: Property income after operating expenses, before mortgage payments.

Annual debt service: All principal + interest payments due on the loan in one year.

Worked example

A small apartment building produces $54,000 NOI and carries $42,000 of annual payments.

DSCR = 54,000 ÷ 42,000 = 1.29, with a $12,000 surplus, comfortable coverage by most educational conventions.

At a 1.25 minimum, the maximum supportable debt service would be 54,000 ÷ 1.25 = $43,200/year.

Assumptions & limitations

•One-year, static measure; no reserves, capex or income growth.
•Interpretation bands are educational; real underwriting varies.

Formula reference

DSCR = Net Operating Income ÷ Annual Debt Service

NOI, Property income after operating expenses, before mortgage payments.
Annual debt service, All principal + interest payments due on the loan in one year.

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Related glossary terms

dscr noi debt service