DSCR Calculator

Calculate your Debt Service Coverage Ratio instantly and understand what lenders are looking for.

The Debt Service Coverage Ratio (DSCR) is the single most important metric in commercial real estate underwriting. It measures whether a property generates enough income to cover its loan payments. Calculated by dividing Net Operating Income by annual debt service, DSCR tells lenders, brokers, and borrowers how much cushion exists between what a property earns and what it owes. A higher DSCR means less risk for the lender and more negotiating power for the borrower. This calculator helps you determine your DSCR and understand how lenders will view your deal.

Calculate Your DSCR

Net Operating Income (NOI) Annual NOI (gross income minus operating expenses)

Annual Debt Service Total annual loan payments (principal + interest)

Debt Service Coverage Ratio

What Is DSCR?

Debt Service Coverage Ratio (DSCR) measures a property's ability to pay its debt obligations from operating income. It answers a simple question: for every dollar of debt payment, how many dollars of income does the property produce?

A DSCR of 1.25x means the property earns $1.25 for every $1.00 it owes in debt payments. That 25-cent cushion is what protects the lender if income dips or expenses rise. The higher the DSCR, the more room there is to absorb setbacks without missing a payment.

DSCR is not just a qualifying metric. It directly affects how much you can borrow. If your DSCR is below a lender's minimum, the solution is usually a smaller loan amount, which means a larger down payment or a different capital structure.

How to Calculate DSCR

DSCR = Net Operating Income / Annual Debt Service

Net Operating Income (NOI) is gross rental income minus operating expenses, excluding debt service, depreciation, and income taxes. Annual debt service is the total of all loan payments (principal and interest) for the year.

Worked Example

A 50-unit apartment building generates $720,000 in gross rental income. After accounting for a 5% vacancy factor and $220,000 in operating expenses (property taxes, insurance, management, maintenance, utilities), the NOI is $464,000. The annual debt service on a $4.5 million loan at 6.5% with 25-year amortization is approximately $382,000.

DSCR = $464,000 / $382,000 = 1.21x

At 1.21x, this deal meets the minimum for some bank lenders but falls short of the typical threshold for CMBS or agency execution. The broker might recommend either a smaller loan amount (to push the DSCR above 1.25x) or targeting lenders with more flexible requirements.

What DSCR Do Lenders Require?

DSCR requirements vary by lender type, property type, and market. The table below provides general ranges, but always confirm current requirements with specific lenders, as these can shift based on market conditions and institutional appetite.

Lender Type	Typical Minimum DSCR	Notes
CMBS / Conduit	1.25x+	Standard for most stabilized properties
Fannie Mae / Freddie Mac	1.25x+	May vary by property type and program
Banks / Credit Unions	1.20x – 1.40x	Wide range depending on the institution
HUD / FHA	1.18x – 1.20x	Lower minimums, but longer timelines
Life Companies	1.30x+	Conservative underwriting, prefer lower leverage
Bridge Lenders	1.00x – 1.10x	Focus on projected NOI, not current
Debt Funds	1.00x – 1.15x	More flexible, higher rates

How DSCR Affects Your Deal

DSCR does not just determine whether you get a loan. It shapes the entire deal structure.

When DSCR is strong (well above the lender's minimum), borrowers can often negotiate better interest rates, longer interest-only periods, or higher loan proceeds. Lenders compete for low-risk deals, and a high DSCR is the clearest signal that a deal carries less risk.

When DSCR is tight (barely meeting minimums), expect higher rates, more restrictive terms, and potentially additional requirements like personal guarantees, escrow reserves, or cash management agreements. Some lenders may structure the loan with a "cash sweep" trigger tied to DSCR levels, meaning if the ratio drops below a set threshold, excess cash flow gets redirected to a lender-controlled reserve.

Two Levers to Improve DSCR

There are only two ways to move DSCR: increase NOI or decrease debt service.

On the income side, that means raising rents to market, reducing vacancy, adding ancillary income (parking, laundry, storage), or cutting operating expenses. On the debt service side, it means requesting a smaller loan amount, negotiating a lower rate, extending the amortization period, or structuring an interest-only period at the beginning of the loan term.

DSCR vs. Other Underwriting Metrics

Metric	Formula	What It Measures
DSCR	NOI / Annual Debt Service	Ability to cover loan payments
Debt Yield	NOI / Loan Amount	Return on loan amount, rate-independent
LTV	Loan Amount / Property Value	Leverage relative to property value
Cap Rate	NOI / Property Value	Unlevered return on property value

Lenders typically evaluate all four metrics together. A deal might have a strong DSCR but weak debt yield, or acceptable LTV but marginal cap rate. Understanding how these metrics interact helps brokers anticipate lender objections and structure deals that check all the boxes. For a deeper look at how brokers use DSCR in deal packaging, see JPro's guide on DSCR loans.

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Frequently Asked Questions

What is a good DSCR for a commercial real estate loan?

Lenders generally look for a DSCR above 1.0x, with higher ratios preferred. Most commercial lenders, including CMBS and agency lenders, typically set minimums in the 1.20x to 1.25x range, though requirements vary by lender type, property type, and market conditions. A DSCR above 1.50x is considered strong and gives borrowers leverage to negotiate better terms.

How do you calculate DSCR?

DSCR is calculated by dividing a property's Net Operating Income (NOI) by its annual debt service (total annual loan payments including principal and interest). For example, a property with $500,000 in NOI and $400,000 in annual debt service has a DSCR of 1.25x.

What happens if my DSCR is below 1.0x?

A DSCR below 1.0x means the property does not generate enough income to cover its debt payments. Lenders will generally not finance a property at these terms. To improve the ratio, you can either increase NOI (raise rents, reduce expenses) or reduce the loan amount to lower debt service.

What is the difference between DSCR and debt yield?

DSCR measures whether a property's income covers its debt payments (NOI divided by annual debt service). Debt yield measures NOI as a percentage of the total loan amount (NOI divided by loan amount). Both are used in underwriting, but debt yield is independent of interest rate and amortization, making it a more stable metric across different rate environments.

Does DSCR include reserves or capital expenditures?

It depends on the lender. Some lenders calculate DSCR using NOI that includes a deduction for replacement reserves, while others do not. Capital expenditures (capex) are generally excluded from the NOI calculation, but lenders may adjust NOI for deferred maintenance or anticipated capital needs during underwriting. Always confirm with your lender how they define NOI for DSCR purposes.

Can I get a commercial loan with a DSCR below 1.25x?

Yes, some lenders accept DSCRs below 1.25x, particularly certain banks and credit unions that may go as low as 1.20x for strong borrowers or well-located properties. However, most CMBS and agency lenders set their minimums higher. A lower DSCR typically means a smaller loan amount, higher interest rate, or additional requirements like personal guarantees or additional collateral.

How can I improve my property's DSCR?

There are two levers: increase NOI or decrease debt service. To increase NOI, you can raise rents to market rates, reduce vacancy, add ancillary income sources, or cut operating expenses. To decrease debt service, you can reduce the loan amount (larger down payment), negotiate a lower interest rate, extend the amortization period, or request an interest-only period.

Do different property types require different DSCR minimums?

Yes. Lenders often adjust DSCR requirements based on property type and perceived risk. Stabilized multifamily properties may qualify at lower DSCRs because of their steady income streams, while hospitality, retail, or special-use properties often face higher DSCR requirements due to income volatility. The specific threshold depends on the lender and the deal.

This content is for informational and educational purposes only and does not constitute financial, legal, tax, or investment advice. JPro (formerly Janover Pro) is a technology platform that connects commercial mortgage brokers with lenders. JPro is not a lender and does not make lending decisions. Loan terms, rates, eligibility, and availability are determined by individual lenders and are subject to change without notice. Consult qualified financial and legal professionals before making financing decisions.