What DSCR means
Debt service coverage ratio compares a property's income available for debt service with its required annual debt payments. The basic formula is NOI ÷ annual debt service. A result of 1.25x means the modeled NOI is 125% of modeled debt service.
The Office of the Comptroller of the Currency notes that the appropriate DSCR depends on factors including amortization and cash-flow volatility. A calculator result is therefore a starting point, not a universal approval threshold.
Use lender-quality NOI
The most important input is NOI. Review vacancy, property taxes, insurance, repairs, management, utilities, and replacement reserves consistently. Lenders may adjust reported income and expenses or apply underwriting assumptions that differ from an owner's records.
The included 10% lower-NOI scenario helps show sensitivity, but it is not a substitute for a detailed stress test.
Frequently asked questions
What is the DSCR formula?
DSCR is net operating income divided by annual debt service.
Is 1.25x always required?
No. Minimums vary by lender, property, program, amortization, and risk.
Does NOI include mortgage payments?
No. NOI is generally calculated before debt service.