DSCR Calculator

What the Ratio Tells a Lender

Divide annual net operating income by annual debt service. A multifamily property with $1,200,000 of NOI and $960,000 of debt service covers its payments 1.25 times over, or 1.25x.

Below 1.00 the building does not pay for its own mortgage. At 0.95 the sponsor writes a check every month to make up the difference. Above 1.00 there is cash left after debt service, and the depth of that cushion is what a lender is really pricing.

The NOI in the Formula Belongs to the Lender

This is where multifamily deals get resized between application and term sheet. Underwriters rebuild the operating statement before the ratio is ever calculated. Vacancy gets marked to the submarket instead of your current rent roll. A management fee goes in whether or not you manage the asset yourself. A per-unit replacement reserve comes out. Trailing twelve months of actuals normally outweigh a forward projection.

A deal that pencils at 1.30x on your spreadsheet can arrive at 1.18x on theirs. Underwrite it their way first and that gap stops being a surprise late in the process.

Is DSCR a One-Time Test?

Not always. Plenty of multifamily loan documents set a minimum at closing and then keep testing it while the loan is outstanding. Dropping below an ongoing covenant can trigger cash management or an event of default even when every payment has been made on time.

Read the definition rather than the number. What counts as debt service when a supplemental loan sits behind the first mortgage, or when a floating-rate loan carries a rate cap, is negotiated deal by deal rather than fixed by the ratio.

Which Constraint Actually Binds?

Coverage, loan-to-value, and debt yield each produce their own maximum loan amount, and the deal gets the smallest one. Coverage tends to bind when rates are high. Loan-to-value binds when values are soft. Debt yield binds when income is thin against the balance. Our debt yield calculator and LTV calculator run the other two.

Estimates only. The minimum coverage a lender requires depends on the property, the borrower, and the program, and your loan documents control how debt service is defined. Tell us what the property does today and the desk will size it against current program parameters.