The debt service coverage ratio (DSCR) compares a property’s net operating income to its annual mortgage payments. Lenders use it to decide whether the property generates enough income to service its debt.
A DSCR above 1.0 means the property covers its mortgage from operations. Most lenders want a cushion above that.
Formula
DSCR = Net operating income (NOI) ÷ Annual debt service
Annual debt service is 12 monthly principal-and-interest payments. It does not include taxes and insurance if those are escrowed separately and already counted in operating expenses.
How to calculate it
- Compute NOI from income and operating expenses.
- Compute the annual mortgage payment (principal and interest).
- Divide NOI by that annual payment.
Worked example
Assume a $250,000 property renting for $2,200/month with typical expenses and a 7.00% loan. Running those numbers through the RentScope engine gives:
Open the free calculator with your own numbers →
FAQ
What DSCR do lenders require?
Many DSCR lenders look for 1.20–1.25 or higher. Some allow 1.0 for strong borrowers or lower-LTV loans.
What does a DSCR below 1 mean?
The property’s operations do not cover its mortgage; you would need to fund the shortfall from other income.
How can I improve DSCR?
Increase rent, reduce operating expenses, put more money down (lower loan), or refinance at a lower rate.
More free calculators
Cap Rate Calculator · Cash-on-Cash Return Calculator · 1% Rule Calculator · BRRRR Method Calculator · Net Operating Income (NOI) Calculator · Gross Rent Multiplier (GRM) Calculator · Break-Even Occupancy Calculator · 50% Rule Calculator · House Hack Calculator · 1031 Exchange Calculator · Rental Property Depreciation Calculator · Seller Financing Calculator · Hard Money Loan Calculator