DSCR Calculator
Check whether a rental's income covers its loan. And how much you could borrow.
Details
= $62,400 / yr
= $20,000 / yr
The loan
Debt service coverage ratio
1.28
Monthly payment
$2,558
Monthly NOI
$3,273
Max loan at 1.25
$383,869
Max payment
$2,619
Borrowing room
$8,869
This works out the debt service coverage ratio: whether a property's income covers its loan payments, and by how much.
Enter the rent and expenses along with the loan terms, and it returns the DSCR along with the maximum loan that would still meet a target ratio.
What DSCR means
DSCR compares what a property earns against what its loan costs. A ratio of 1.25 means the income is 25% more than the payments; anything under 1.0 means it does not cover them at all.
It matters because DSCR loans qualify the property, not you. There is no income verification or debt-to-income test on the borrower, which is why investors and the self-employed use them.
That shifts the whole underwriting question. The lender is not asking whether you can pay; they are asking whether the building can.
Below 1.0 the property does not cover its own loan, so the shortfall comes from your pocket. Most lenders want at least 1.20 to 1.25.
What to enter
- Annual NOI
- Net operating income: rent minus vacancy and operating expenses, before the mortgage. Enter it directly or build it from the rent fields.
- Rent, vacancy and expenses
- Used to construct the NOI. Lenders apply their own vacancy and expense assumptions, which are often less generous than yours.
- Loan amount, rate and term
- These set the annual debt service, which is the denominator.
What different ratios mean to a lender
- Below 1.00
- Income does not cover the loan. Most lenders decline, though some accept it on strong-appreciation markets with a larger down payment.
- 1.00 to 1.19
- Breaking even to thin. Possible with some lenders, usually at a worse rate.
- 1.20 to 1.25
- The common minimum for approval on residential investment property.
- 1.25 to 1.50
- Comfortable. Real cushion for vacancy and repairs.
- Above 1.50
- Strong. Often commercial or multifamily, where lenders expect more headroom.
What this assumes
NOI excludes the mortgage. Including it is the most common mistake and makes the ratio meaningless.
Lenders use their own assumptions for vacancy, management and repairs, so their calculated DSCR is frequently lower than the owner's.
How to calculate the debt service coverage ratio
Divide what the property earns by what the loan costs. Both figures must cover the same twelve months.
- net operating income
- Rent, minus vacancy, minus operating expenses — before the mortgage
- annual debt service
- Twelve monthly principal and interest payments
Build the NOI. Gross rent, less vacancy, less operating expenses. Keep the mortgage out of it.
Work out annual debt service. The monthly payment times twelve. Some lenders include taxes and insurance here; check which convention yours uses.
Divide. NOI over debt service. Above 1.0 means the property covers itself.
Compare to the lender's floor. Usually 1.20 to 1.25 for residential investment loans.
See a worked example: why a $300,000 loan on this property would be declined
- NOI
- $17,700 a year
- Loan
- $300,000 at 6.5% over 30 years
Monthly payment: $1,896.20, so annual debt service is $22,754.
DSCR: $17,700 ÷ $22,754 = 0.78.
The property covers only 78% of its own loan payments, so it is short about $5,000 a year.
To reach a 1.25 DSCR on this NOI, the debt service would need to fall to about $14,160 a year, which means borrowing roughly $187,000 instead of $300,000.
DSCR 0.78 — declined
Frequently asked questions
Most residential investment lenders want 1.20 to 1.25 as a minimum. Commercial lenders often want more.
Some programmes will go to 1.0 or even below, but expect a larger down payment and a higher rate in exchange for the extra risk.
A mortgage underwritten on the property's income rather than the borrower's. No pay stubs, tax returns or debt-to-income calculation on you personally.
That makes them popular with self-employed buyers and investors who already hold several mortgages, since conventional lending caps how many you can carry.
It depends on the lender, and it is worth asking directly. Some use principal and interest only; others use PITI, adding taxes and insurance.
Including them lowers the ratio, sometimes enough to change the decision. Make sure you are comparing the same definition when you shop between lenders.
Three levers: borrow less, raise the rent, or cut operating expenses. Borrowing less is the most direct, since it reduces the denominator immediately.
A longer loan term also lowers the annual payment and lifts the ratio, though it costs more in total interest over the life of the loan.
Related but not the same. DSCR is a ratio; cash flow is a dollar amount. A DSCR of 1.0 means cash flow is exactly zero.
The ratio is what lenders use because it scales across deals of any size, while cash flow is what actually reaches your account.
Problems people actually run into
Putting the mortgage inside NOI
NOI is calculated before financing. Deducting the loan payment as if it were an operating expense, then dividing by that same payment, produces a number that means nothing.
Operating expenses are tax, insurance, management, repairs and maintenance. The mortgage belongs in the denominator, never the numerator.
Using your expense assumptions rather than the lender's
Owners routinely assume 3% vacancy and no management fee because they manage it themselves. Lenders commonly assume more of both, plus a repairs reserve.
That gap can move a DSCR from a comfortable 1.25 to a failing 1.05. Running the numbers on conservative assumptions first avoids a surprise at underwriting.
Results are estimates for general information only and are not professional financial, medical, or legal advice. Read our full disclaimer.
Last updated: September 4, 2026