Free Debt Service Coverage Ratio calculator with 2026 lender benchmarks.
DSCR (Debt Service Coverage Ratio) is the single most-used metric in commercial real estate lending. It answers one question: does the property generate enough income to cover its mortgage payment?
A DSCR of 1.00× means the property earns exactly enough to pay its debt — no cushion, no profit. Lenders want a cushion, so they require DSCR above 1.00×. Agency programs typically require 1.25×, bank lenders want 1.30×+, and some DSCR rental loan programs go as low as 1.00× or even sub-1.00× with compensating factors.
The formula relies on NOI (net operating income) and annual debt service. NOI should exclude mortgage, capital expenditures, and depreciation — it\'s cash flow from operations only. Annual debt service is the 12-month principal + interest payment on the loan.
If your DSCR is too low, you have three levers: raise NOI (increase rents, cut expenses), lower the loan (bigger down payment), or extend amortization (lowers annual payment). In practice, negotiating the purchase price down is often the fastest path because it directly reduces the needed loan amount.
1.25× is the floor for agency multifamily (Fannie Mae DUS, Freddie Mac SBL). Bank lenders and SBA typically want 1.25×–1.30×+. DSCR loans for single-family rentals can go as low as 1.00×, though best pricing comes at 1.20×+.
DSCR stands for Debt Service Coverage Ratio. It measures whether a property's NOI can cover its annual debt payments. A DSCR of 1.25× means the property generates 25% more income than needed to pay the mortgage.
Increase NOI (raise rents, reduce expenses), lower the loan amount (bigger down payment), or negotiate a longer amortization schedule (lower annual debt service). Negotiating the purchase price down is often the fastest lever because it directly reduces the loan you need.
DSCR uses NOI (Net Operating Income), which is before debt service, taxes, and depreciation. It is an operating metric — it reflects the property's ability to pay its mortgage, not the owner's after-tax position.
DSCR uses annual debt service (which depends on rate and amortization). Debt yield uses just the loan amount (NOI ÷ Loan). Debt yield is rate-neutral, so it's preferred by conservative lenders because it does not get distorted by low rates or long amortization.