DSCR Calculator
Divide NOI by annual debt service to get the coverage ratio lenders underwrite to, then size the largest loan that still clears their minimum. Handles amortisation and interest-only.
DSCR Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Models a single loan. A property with mezzanine or second-lien debt needs all debt service included to be meaningful.
- Uses the contract rate entered; lenders frequently underwrite at a stressed rate above it.
- Does not test debt yield or loan-to-value, both of which can bind before coverage does.
In short: DSCR is net operating income divided by annual debt service. Most commercial lenders require at least 1.25x, meaning the property earns 25% more than the loan costs. Below 1.00x the property cannot pay its own mortgage from operations.
Formula
DSCR = NOI ÷ annual debt service
max loan = (NOI ÷ required DSCR) ÷ debt constant
[('NOI', 'annual net operating income, unlevered'), ('annual debt service', 'twelve monthly principal and interest payments'), ('debt constant', 'annual debt service per dollar of loan'), ('required DSCR', "the lender's minimum, commonly 1.20x to 1.25x")]
Worked Example
- Establish NOI on trailing actuals, not pro-forma — lenders will.
- Compute the monthly payment from the loan, rate and amortisation, then multiply by twelve.
- Divide NOI by that annual figure to get the coverage ratio.
- Compare against the lender's minimum for the asset class.
- If it falls short, either reduce the loan, extend amortisation, or raise NOI — those are the only three levers.
84,240 of NOI against a 787,500 loan at 6.5% over 30 years gives annual debt service of 59,730.43 and a DSCR of 1.4103x, comfortably above a 1.25x minimum. At that minimum the same NOI would support 888,512 of debt — more than the loan requested — so here the loan-to-value test binds before coverage does. The property could lose 29.09% of its NOI before reaching 1.00x.
Strengths & Limits Of This Model
Where this engine is strong
- Sizes the maximum loan, not just the ratio
- Shows the exact NOI cushion before breakeven
- Compares amortising against interest-only structures
Where it stops
- Single-loan model
- No debt yield or LTV test
Practical Use Cases
Testing loan eligibility
Checking coverage against a lender's minimum before applying.
Sizing the maximum loan
Finding the largest debt the income supports at the required ratio.
Comparing loan structures
Seeing what longer amortisation or interest-only does to coverage.
Stress-testing a purchase
Establishing how much NOI can fall before the loan is not covered.
Refinance planning
Confirming the property still clears coverage at today's rates rather than the original ones.
Methodology & Editorial Standards
The monthly payment is computed with the standard annuity formula and annualised, or taken as simple interest where interest-only is selected. The maximum loan is the algebraic rearrangement lenders actually use: divide NOI by the required ratio to get supportable debt service, then divide by the debt constant. The cushion figure is one minus the reciprocal of the ratio, which is the exact proportion of NOI that can be lost before coverage reaches 1.00x.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
DSCR Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
What DSCR do lenders require?
Most commercial lenders set a minimum of 1.20x to 1.25x for stabilised property. Agency multifamily programmes commonly sit at 1.25x, office and retail at 1.25x to 1.35x, and hospitality higher again at 1.40x or more because the income is more volatile. Bridge and transitional lending can go lower, priced for the extra risk.
What does a DSCR of 1.25 actually mean?
The property produces 1.25 dollars of net operating income for every dollar of debt service. Put the other way, NOI can fall by 20% before coverage reaches breakeven, because one divided by 1.25 is 0.80. The ratio is a cushion expressed as a multiple.
What happens if DSCR is below 1.0?
The property does not generate enough operating income to pay its own mortgage, so the shortfall must come from the owner's other resources. Almost no conventional lender will originate there, and an existing loan may breach a covenant, which can trigger cash sweeps or default remedies long before a payment is actually missed.
Does DSCR use gross rent or NOI?
NOI, for commercial loans. Some residential investor products use a simplified rent-to-PITIA test instead, which is not the same thing and is generally more forgiving because it never deducts operating expenses. If a quoted DSCR looks unusually strong, check which definition is being applied.
How does amortisation affect DSCR?
Materially. A longer schedule lowers the annual payment and raises coverage at an unchanged interest rate, which is why borrowers negotiate for thirty-year amortisation. The trade is slower equity build and a larger balance at maturity.
Does interest-only improve DSCR?
Yes, because no principal is repaid, so annual debt service is simply the interest. It is the strongest single lever on the ratio. It is also the most deceptive: the balance is unchanged at maturity, so the refinancing risk is deferred rather than removed, and coverage will drop sharply when the loan begins to amortise.
Is DSCR the same as debt yield?
No. Debt yield is NOI divided by the loan amount and deliberately ignores the rate and amortisation, which makes it immune to the structuring tricks that flatter DSCR. Lenders increasingly test both, typically wanting a debt yield of 8% to 10% alongside 1.25x coverage.
Should I use in-place or pro-forma NOI?
In-place, and expect the lender to insist on it. Underwriting normally runs off trailing twelve-month actuals, sometimes with a haircut. Pro-forma NOI describes a building you intend to create; it belongs in your own return analysis, not in a coverage test.
How do I improve a DSCR that falls short?
There are only three levers: borrow less, lengthen amortisation or lower the rate, or raise NOI. Raising NOI is the only one that also increases the value of the asset, so it is worth more than the coverage improvement alone suggests.
Do lenders stress-test the ratio?
Routinely. Many underwrite at a rate above the contract rate, or apply a vacancy assumption worse than current performance, to confirm coverage survives. Model the same way before you commit, because a deal that only works at today's rate and full occupancy is not financeable through a cycle.