DSCR Calculator
Calculate debt service coverage ratio — the margin between a property's net operating income and its loan payments.
Content updated August 10, 2026
Income covers debt service with little margin. Many lenders look for more cushion than this.
Fannie Mae defines DSCR for multifamily lending as underwritten net cash flow divided by annualised debt service. Lenders compute underwritten income with their own adjustments, so a lender's figure can differ from this estimate. Minimum requirements vary by lender and programme and change with market conditions. Not lending advice.
The debt service coverage ratio compares the income a property produces with the loan payments it owes. At 1.00 the two are exactly equal. Above 1.00 there is a surplus; below it, the property does not cover its own debt and the difference has to come from somewhere else.
It is the central underwriting number for income-property lending, and for DSCR loans specifically it often matters more than the borrower's personal income. This calculator derives net operating income from rent, vacancy and operating expenses, computes the annual debt service from your loan terms, and divides one by the other.
The DSCR formula
DSCR = net operating income ÷ annual debt servicenet operating income = (gross rent + other income) × (1 − vacancy rate) − operating expenses, excluding debt service, capital expenditure, depreciation and income tax · annual debt service = 12 × the monthly loan payment.
Worked example
A property with 16,680 of net operating income and a 187,500 loan at 7% over 30 years pays about 1,247 a month, or 14,964 a year. DSCR is 16,680 ÷ 14,964 ≈ 1.11 — the property covers its debt service with roughly an 11% margin, below the 1.25 many lenders prefer.
Assumptions, rounding, and limitations
Assumptions
- Net operating income excludes debt service, capital expenditure, depreciation and income tax.
- The vacancy allowance is applied to gross scheduled income before operating expenses are subtracted.
- Debt service is a fixed-rate, fully amortizing monthly principal-and-interest payment over the entered term. Interest-only periods are not modelled and would raise the ratio while they last.
- Income and expenses are treated as stable across the year.
Rounding: Net operating income and the ratio are computed at full floating-point precision. The ratio is displayed to two decimal places and currency amounts to the nearest whole unit; the guidance band uses the unrounded ratio.
Limitations
- Lenders underwrite income with their own vacancy and expense assumptions, so a lender's DSCR for the same property is frequently lower than this estimate.
- Minimum DSCR requirements vary by lender, programme and property type and change with market conditions. No threshold shown here is a lending decision.
- Escrow, reserves, mortgage insurance, fees and prepayment terms are not modelled.
- This is a general analysis tool, not lending, investment or legal advice.
Sources
How DSCR is defined
Fannie Mae's Multifamily Selling and Servicing Guide defines DSCR as the ratio of underwritten net cash flow to the annualised debt service for the loan, with underwritten net cash flow being underwritten effective gross income less underwritten total expenses.
The word 'underwritten' is doing real work there. A lender does not simply accept the rent roll and expense schedule you present — it applies its own adjustments, vacancy assumptions and expense minimums. Your figure and the lender's figure can therefore differ on the same property, usually with the lender's being more conservative.
Debt service also depends on loan structure. Fannie Mae notes that a full interest-only loan reflects only interest, while amortizing loans include principal and interest. An interest-only period flatters DSCR relative to what happens when amortization begins.
What lenders look for
Requirements vary by lender, programme and property type, and they move with market conditions — Fannie Mae states explicitly that DSCR and loan-to-value requirements are subject to change and that ranges vary for affordable-housing transactions.
As a broad orientation, income-property lenders commonly want a cushion rather than bare coverage, and 1.25 is a frequently cited reference point. Treat any specific number, including that one, as a starting expectation to confirm with the actual lender rather than as a rule.
A ratio below 1.00 does not necessarily end a deal. It does mean the property cannot service the loan from its own income, so the lender is relying on something else — reserves, other income, or a lower loan amount.
Raising a ratio that falls short
There are only three levers. Increase net operating income, by raising rent or reducing operating expenses. Reduce the loan amount, usually by putting more cash in. Or reduce the payment on the same loan, through a lower rate or a longer amortization.
Lengthening amortization is the one that flatters the ratio without improving the property. It lowers the payment and raises DSCR while increasing total interest paid over the life of the loan, so it improves the metric more than it improves the investment.
Frequently asked questions
▶How do you calculate DSCR?
Divide net operating income by annual debt service. NOI is income after vacancy and operating expenses but before loan payments; annual debt service is twelve monthly principal-and-interest payments, or interest only if the loan is interest-only.
▶What DSCR do lenders require?
It varies by lender, programme and property type, and changes with market conditions. A cushion above bare coverage is normal and 1.25 is a commonly cited reference point, but the only reliable figure is the one your lender states.
▶What does a DSCR of 1.25 mean?
Net operating income is 1.25 times the annual debt service — the property generates 25% more income than it needs to make its loan payments, leaving a margin for vacancy or unexpected costs.
▶What if my DSCR is below 1.0?
The property's income does not cover its debt service, so the shortfall must be funded from elsewhere. Lenders generally treat this as a reason to reduce the loan amount rather than to decline outright.
▶Does DSCR include operating expenses?
Yes — they are subtracted before the ratio is computed, because DSCR uses net operating income rather than gross rent. It does not include capital expenditure, depreciation or income tax.
▶Will my lender calculate the same DSCR as this tool?
Not necessarily. Lenders underwrite income with their own vacancy and expense assumptions, which are typically more conservative than an owner's projections, so the lender's ratio is often lower than a self-calculated one.
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Open calculator →Disclaimer: DSCR Calculator results are estimates for general information and education only, and are not financial, tax, legal or medical advice. Verify important decisions with a qualified professional.