Real Estate
DSCR Calculator
Calculate a fixed-rate monthly payment and annual debt service from loan principal, rate, and amortization term, then divide entered annual net operating income by annual debt service to estimate DSCR and the remaining NOI buffer.
Monthly debt payment-
Annual debt service-
Debt service coverage ratio-
NOI after debt service-
Exact scenario comparison
Loan interest rate (%) scenarios
Exact scenario comparisonLoan interest rate (%) changes while all other entered assumptions remain constant.
| Loan interest rate (%) | Monthly debt payment | Annual debt service | Debt service coverage ratio | NOI after debt service |
|---|
How to use DSCR Calculator
- Enter lender-adjusted annual NOI together with loan principal, interest rate, and amortization term.
- Review monthly payment, annual debt service, DSCR, and the dollar NOI buffer after modeled debt payments.
- Compare the ratio with the lender's minimum and confirm its NOI adjustments, reserves, stress rate, balloon terms, and underwriting definition.
Calculator guide
Understanding DSCR Calculator
Debt service coverage ratio compares property income available for debt with the required annual loan payments. Its usefulness depends on a correctly underwritten NOI: overstated rent or understated expenses can make the ratio appear safer than the property actually is.
Calculation method
How the calculation works
Calculate annual debt service from a fixed-rate amortizing loan and divide net operating income by that obligation. Calculate annual debt service from a fixed-rate amortizing loan and divide net operating income by that obligation.
Worked situations
Practical examples
- Use annual NOI after vacancy and operating expenses but before mortgage payments, depreciation, and income tax.
- Enter the actual amortization term rather than the loan maturity when a commercial loan amortizes over a longer period than its balloon date.
- Test a higher rate or lower NOI to understand how much coverage remains under a stress scenario.
Better inputs
Useful tips
- Reconcile NOI to rent rolls, leases, historical statements, taxes, insurance, management, repairs, utilities, and replacement reserves.
- Confirm whether the lender includes reserves or other obligations in debt service.
- Check the lender's minimum DSCR and underwriting adjustments instead of relying on a universal threshold.
Before relying on the result
Limitations and common mistakes
- The model assumes one fully amortizing fixed-rate loan and equal monthly payments.
- Balloon maturity, interest-only periods, variable rates, fees, reserves, secondary debt, taxes, capital expenditures, and lender-specific NOI adjustments are excluded.
- The result is not underwriting approval, a covenant test, appraisal, valuation, or assurance that cash will be available.
Reference
Key terms
- Net operating income
- Annual property income after operating expenses and before financing and income tax.
- Annual debt service
- Twelve modeled monthly principal-and-interest payments.
- DSCR
- Annual NOI divided by annual debt service.
- NOI buffer
- Annual NOI remaining after modeled annual debt service.
Important note
Calculated from the entered property and financing assumptions. It does not replace lender, appraisal, legal, tax, or investment review.
Frequently asked questions
What does a DSCR below 1.00 mean?
Modeled NOI is insufficient to cover modeled debt service without another cash source.
Is a higher DSCR always better?
It indicates more modeled coverage, but can also reflect lower leverage; return, risk, property quality, and loan terms still require review.
Should depreciation reduce NOI?
No. Depreciation is a noncash tax and accounting item and is not an operating expense in standard property NOI.
Why may a lender calculate a different DSCR?
Lenders can adjust rent, vacancy, expenses, management fees, replacement reserves, loan constants, and subordinate debt.