Globalbiz CRE Academy
Core Underwriting Ratios

DSCR — Debt Service Coverage Ratio

Can the property actually pay the loan?

DSCR (Debt Service Coverage Ratio) equals a property's Net Operating Income divided by its Annual Debt Service. It measures how comfortably the property's income covers the loan payment — most lenders require at least 1.25x.

Can the property pay the loan?

DSCR answers one question: does the property make enough money to pay the loan comfortably? Lenders usually want at least 1.25. A DSCR of 1.25 means the property makes $1.25 for every $1.00 it owes. Below 1.25, lenders get nervous and may say no or shrink the loan.

DSCR

DSCR = NOI ÷ Annual Debt Service

NOI
— Net Operating Income (annual)
Annual Debt Service
— Total of all loan payments (principal + interest) in one year

Worked example: NOI of $125,000 and annual debt service of $100,000 gives DSCR = $125,000 ÷ $100,000 = 1.25.

Try it: see how DSCR constrains loan size

Enter NOI, rate, and amortization — see the maximum loan a given DSCR minimum allows, alongside LTV and Debt Yield.

Loan Sizer — DSCR / LTV / Debt Yield

Generalizes the classic Deal Checker: size the maximum loan under every constraint, then test a specific requested loan amount against each one.

$360,000
$
$4,000,000
$
6.5%
25 yrs
75%
1.25
9%

Maximum Loan (binding constraint wins)

$3,000,000

Binding constraint: LTV

By LTV$3,000,000
By DSCR$3,554,465
By Debt Yield$4,000,000
$2,800,000
$

DSCR

1.59x

min 1.25x

LTV

70.0%

max 75%

Debt Yield

12.9%

min 9%

This requested loan amount passes every constraint — financeable at these terms.

Module Check

Question 1 of 1quick mode

A building has NOI of $150,000 and annual debt service of $100,000. What is the DSCR?

Test Me on the Above

Check what you actually retained from DSCR — Debt Service Coverage Ratio. Pick a mode:

Related Concepts

Frequently Asked Questions

What does DSCR stand for?

DSCR stands for Debt Service Coverage Ratio: Net Operating Income divided by Annual Debt Service.

What is a good DSCR for a commercial loan?

Most commercial lenders want a minimum DSCR of about 1.25x, meaning the property generates $1.25 of NOI for every $1.00 of annual debt service. Requirements vary by lender and property type — bridge lenders may accept lower, life companies often require higher.