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 — 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 →