Calculate the debt service coverage ratio on a commercial real estate loan and see how lenders interpret the result.
What is DSCR?
Debt service coverage ratio measures whether a property’s income covers its loan payments. The formula is simple:
A DSCR of 1.25x means the property generates 25% more income than it needs to cover debt service.
Worked example
A retail property with $500,000 NOI and $400,000 of annual debt service has a DSCR of 1.25x ($500,000 ÷ $400,000). Most stabilized senior lenders look for 1.20x–1.30x depending on asset type and risk.
How lenders interpret it
DSCR is often the binding constraint on loan size. Lenders set a minimum DSCR and solve backward for the maximum loan the property’s income will support. A lower minimum DSCR allows more proceeds. A higher one, typical for riskier assets or stress scenarios, reduces them.
What this means for your deal
If your DSCR is tight, your loan may be sized down regardless of LTV. Our Loan Sizing Calculator shows which constraint (DSCR, debt yield, or LTV) actually binds your deal.
Open the Loan Sizing Calculator →