DSCR Calculator
Calculate your Debt Service Coverage Ratio instantly. Find out whether your rental property qualifies for a DSCR loan. Results update in real time.
Property & Loan Details
% of time the property is empty
Taxes, insurance, HOA, management
Principal + interest only
Results
Monthly NOI
$1,600.00
Annual NOI
$19,200.00
DSCR Ratio
1.33
Lender Verdict
Likely Approved
How to Calculate DSCR
DSCR is a simple ratio that compares how much net income a property produces to how much debt it carries.
DSCR Formula
DSCR = Annual NOI ÷ Annual Debt Service
Annual NOI = (Monthly Rent × (1 − Vacancy) − Monthly Expenses) × 12
Example: ($1,900 effective rent − $300 expenses) × 12 = $19,200 NOI
$19,200 ÷ ($1,200 × 12) = DSCR 1.33
A DSCR above 1.0 means the property generates more income than needed to service the debt. Lenders typically want to see at least 1.25 for comfortable approval.
DSCR Thresholds Explained
- ≥ 1.25 — Likely approved by most DSCR lenders. The property earns 25% more than it costs to service the debt.
- 1.0–1.25 — Marginal. Some lenders will approve with compensating factors (lower LTV, strong credit). Others will not.
- < 1.0 — Likely denied. The property does not generate enough income to cover its debt. Improve rents, reduce expenses, or renegotiate loan terms.
DSCR Loans vs. Conventional Loans
| Feature | DSCR Loan | Conventional Loan |
|---|---|---|
| Income verification | Property income only | Personal income (W-2/tax returns) |
| Typical rate premium | 0.5–1.5% above conventional | Baseline |
| Best for | Self-employed, portfolio investors | W-2 employees, primary residence |
| Max properties | Typically unlimited | Usually 10 financed properties |
Frequently Asked Questions
- What is DSCR?
- DSCR (Debt Service Coverage Ratio) measures whether a property generates enough income to cover its debt obligations. It is calculated by dividing the property's Net Operating Income (NOI) by its annual debt service (mortgage payments).
- What DSCR do lenders require?
- Most DSCR lenders require a minimum ratio of 1.0 to 1.25. A ratio of 1.25 is the most common threshold — it means the property earns 25% more income than needed to cover the mortgage. Some lenders accept 1.0 (break-even) for strong borrowers.
- What is a DSCR loan?
- A DSCR loan is a non-QM (non-qualified mortgage) loan where approval is based on the property's rental income rather than the borrower's personal income. This makes them popular with self-employed investors and those with complex income situations.
- How is NOI calculated for DSCR purposes?
- NOI (Net Operating Income) is the annual rental income minus all operating expenses — taxes, insurance, HOA fees, property management, and a vacancy allowance. Mortgage payments are excluded from NOI; they are the debt service that NOI is compared against.
- Can I improve my DSCR?
- Yes. You can improve DSCR by increasing rental income (value-add renovation, market-rate lease-up), reducing operating expenses, or negotiating a lower interest rate or longer loan term to reduce monthly debt service. A larger down payment also reduces the loan and therefore the monthly payment.