DSCR calculator

How to read the result

DSCR = net operating income divided by annual debt service². A ratio of exactly one means the property earns its mortgage payment and nothing more; every lender wants a margin above that. The calculator shows four things a lender would look at in the same order: the ratio on your loan, the ratio on an interest-only payment, the largest loan your NOI supports at the chosen minimum, and how much income you could lose before the payment is no longer covered.

Published DSCR minimums

The gap between the floors and the averages matters. A loan that just clears a published minimum is usually also near the leverage limit, and the lender will look harder at the rent roll. Pools of real loans run far above the floors because leverage and debt yield bind first on most deals.

Worked example

Illustration, not a quote: $200,000 of NOI, a $2,000,000 loan at 6.50% on a 30-year amortization. Annual debt service is $151,696.33, so DSCR is 1.3184x. On the interest-only payment ($130,000.00 a year) it would be 1.5385x.

• At a 1.25x minimum, the same NOI supports a loan of up to $2,109,478.
• NOI could fall 24.2% before the payment is no longer covered at all.
• If the rate were 0.75 points higher, the largest loan at that minimum would drop to $1,954,529. Rate moves hit DSCR sizing directly; LTV and debt yield do not move.

What lenders actually check

• Their NOI, not yours. Underwriting starts from income after a vacancy allowance (Effective gross income = revenue after a vacancy rate and expected credit losses²) and subtracts a reserve even if you never fund one: Underwritten operating expenses include a replacement reserve, whether or not it is funded².
• Which payment. Freddie Mac tests DCR on interest-only loans using an amortizing payment, not the interest-only payment⁹. Some bridge lenders and conduits size on interest-only coverage, which makes their loans look bigger on paper.
• Net cash flow vs NOI. CMBS pools report DSCR on net cash flow, after leasing costs and capital reserves, which is lower than NOI coverage on the same loan.
• Global coverage. On owner-occupied and SBA loans the lender also tests the business and the guarantor. SBA 7(a) states both figures: 1.15x (1.0x global)⁵.
• Stress. On floating-rate loans many lenders test coverage at a higher rate than today's. Use the "rate at which coverage hits the minimum" row to see your margin.

Edge cases

• NOI at or below zero: there is no loan to size; the tool shows a dash.
• Interest-only loans: set amortization to 0 and the ratio uses the interest-only payment throughout.
• Seasonal or lease-up properties: lenders size on in-place income, so a building still filling up sizes on today's NOI, not the pro forma. That is the usual case for a bridge loan first.

Method and formula

annual debt service = 12 x L x i / (1 - (1 + i)^-n) i = rate / 12, n = amortization months DSCR = NOI / annual debt service largest loan at minimum DSCR = NOI / (DSCR_min x loan constant) loan constant = annual debt service per $1 NOI cushion = 1 - 1 / DSCR

The rate at which coverage hits the minimum is found by bisection on the same payment formula. Debt service uses 30/360 monthly payments, the convention most fixed-rate notes use for the scheduled payment.