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    Underwriting / DSCR

    DSCR calculator

    Commercial lenders size a loan by coverage, not by the borrower’s optimism. Debt service coverage ratio is net operating income divided by the annual payment, and this calculator shows the ratio, the payment the income can support at a given covenant, and the loan that payment buys.

    Covenant1.25×Coverage1.50×Headroom$20,000
    DSCR
    1.50
    Minimum 1.25 required
    Verdict
    Passes
    Coverage clears the covenant
    Supported debt service
    $96,000
    Annual payment the NOI can carry
    Indicative loan
    $1,131,895
    At 7.00% over 25 years
    Coverage at common covenants
    A lender sets the minimum; the same property passes or fails depending on it.
    1.50× actual
    Coverage at common covenants
    Minimum DSCRRequired NOIVerdict
    1.15×$92,000Passes
    1.25×$100,000Passes
    1.35×$108,000Passes
    1.50×$120,000Passes

    NOI is before debt service, tax and capital reserves unless you have already deducted them.

    Inspect the model
    Choose a quick result view, a scaled comparison, or the complete diagnostic set.
    DSCR against NOI
    The covenant line is crossed where income covers debt service by the required multiple.
    DSCR against NOI0.0000.6721.342.022.693.36$0.00$0.00$24,000$24,000$48,000$48,000$72,000$72,000$96,000$96,000$120,000$120,000$144,000$144,000$168,000$168,000$192,000$192,000$216,000$216,000$240,000$240,000DSCR
    Income against debt service
    The surplus is what remains after the loan is paid.
    Income against debt service$0$28.3k$56.6k$85.0k$113.3k$141.6kNOINOI$80.0kDebt serviceDebt service$40.0kSurplusSurplusAnnual
    Canonical equations
    The exact relationships implemented by this engine.

    NOI / annual debt service · The covenant lenders underwrite to.

    NOI / minimum DSCR · The largest payment the property can carry.

    PV(supported service / 12, r/12, n) · Converts the payment ceiling into principal.

    finance methodology

    A clear path from inputs to results.

    Commercial lenders size a loan by coverage, not by optimism. Debt service coverage ratio is net operating income divided by the annual payment, and this calculator shows the ratio, the payment the income can support at a given covenant, and the loan that payment buys.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Enter net operating income before debt service.
    2. Enter the annual principal and interest.
    3. Set the lender’s minimum coverage.
    4. Read the supported loan at your rate and amortisation.

    The formula

    DSCR=NOIannual debt serviceDSCR = \frac{NOI}{\text{annual debt service}}

    Reference: Commercial underwriting covenant, typically 1.20×–1.35×; SBA SOP 50 10 requires 1.25× for 7(a) loans.

    Worked example

    $120,000 NOI against $80,000 of debt service

    Inputs
    • NOI $120,000.
    • Annual debt service $80,000.
    • Covenant 1.25×.
    • Rate 7%, 25-year amortisation.
    Calculation path
    1. 1

      DSCR: 120,000 / 80,000 = 1.50×.

    2. 2

      Supported service at 1.25×: 120,000 / 1.25 = $96,000.

    3. 3

      Monthly payment: $8,000.

    4. 4

      Loan at 7% over 300 months: about $1,131,895.

    5. 5

      Headroom: 120,000 − 100,000 = $20,000 a year.

    Result

    DSCR 1.50× · supported service $96,000 · loan capacity $1.13M.

    Interpreting the result

    Coverage is a cushion, not a target. A property at 1.50× can absorb a 17% fall in NOI before breaching a 1.25× covenant. That cushion is what lenders are really buying, and it is why a rate rise that cuts the supported loan matters more than the rate itself.

    Assumptions & limitations

    • NOI is before debt service, income tax and capital reserves unless already deducted.
    • Single-year snapshot; multi-year pro formas include rent growth and rollover.
    • Lenders also apply LTV, debt yield and reserves.

    Frequently asked questions

    What is a good DSCR?

    Most lenders want 1.20× to 1.35×. Below 1.0× the property cannot cover its own debt.

    Is DSCR used for residential loans?

    No. Residential lending uses DTI. DSCR is a commercial and investment-property measure.

    Does a higher DSCR mean a bigger loan?

    No — the opposite. A higher required covenant reduces the payment the income can support, and therefore the loan.

    Methodology last reviewed 2026-10-21. Results are informational and not financial or engineering advice — see our disclaimer.