DSCR calculator
Debt service coverage ratio (DSCR) is net operating income divided by annual loan payments. Commercial lenders typically require at least 1.25x on stabilized properties and 1.10–1.20x on bridge or acquisition deals. Enter your NOI and loan terms to compute DSCR and the maximum loan your income supports.
What lenders require
Minimum DSCR varies by transaction type. These are the thresholds Relendi's underwriting engine applies, in line with market practice:
| Transaction type | Typical minimum DSCR |
|---|---|
| Stabilized / refinance | 1.25x |
| Acquisition | 1.20x |
| Bridge | 1.10x |
| Construction | 1.10x |
When DSCR is the binding constraint, lenders reduce the loan amount until the ratio clears the minimum — use the loan sizer to see all four constraints (LTV, DSCR, debt yield, LTC) side by side.
Frequently asked questions
What is a good DSCR for a commercial loan?
Most lenders look for a DSCR of at least 1.25x on stabilized commercial properties, meaning net operating income covers annual debt service with a 25% cushion. Acquisition loans are often underwritten around 1.20x, while bridge and construction loans may accept 1.10x because income is expected to grow after improvements.
How is DSCR calculated?
DSCR equals net operating income divided by annual debt service. For example, a property with $560,000 NOI and $381,000 in annual loan payments has a DSCR of 1.47x. NOI is calculated before debt service and income taxes, but after operating expenses like insurance, property taxes, utilities, and management.
Does DSCR include principal or only interest?
Annual debt service includes both principal and interest on an amortizing loan. For interest-only loan periods, debt service is the interest payment alone, which is why an IO structure temporarily raises DSCR for the same loan amount.
What happens if my DSCR is below the lender's minimum?
The loan amount is typically reduced until the ratio clears the minimum — DSCR is often the binding constraint that sizes a commercial loan, not the loan-to-value ratio. You can also improve DSCR by documenting higher NOI, extending amortization, or negotiating a lower rate.
Is DSCR the same as debt yield?
No. DSCR compares NOI to actual loan payments, so it changes with interest rate and amortization. Debt yield is NOI divided by the loan amount, independent of loan terms — lenders use it as a rate-proof backstop, commonly requiring at least 8%.
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