DSCR Calculator

How the DSCR is worked out

DSCR = income ÷ debt service. On the lender tab the income is the monthly rent and the debt service is the monthly PITIA: principal and interest plus property taxes, insurance and HOA dues. On the NOI tab the income is the year's net operating income and the debt service is the year's loan payments.

Worked example, lender method: $3,000 a month of rent on a $300,000 loan at 7.5% over 30 years. Principal and interest are $2,097.64 a month (payment = loan × r ÷ (1 − (1 + r)^−n), with r = 7.5% ÷ 12 and n = 360). Add $350 of taxes and $125 of insurance and PITIA is $2,572.64. $3,000 ÷ $2,572.64 = 1.17, with $427.36 a month left over.

An interest-only loan pays only the interest, loan × rate ÷ 12: $1,875 a month on the same loan. PITIA falls to $2,350 and the DSCR rises to 1.28. The principal is still owed when the interest-only period ends.

Lender method vs NOI method

The lender method (rent ÷ PITIA) is the test rental DSCR loans commonly use. It counts only the costs that sit in the payment: the loan, the taxes, the insurance and the HOA. Vacancy, repairs, management and utilities are left out, so the ratio looks better than the property's real margin.

The NOI method is the textbook and commercial one: net operating income ÷ annual debt service. NOI is the year's rent and other income minus vacancy and credit loss and minus the costs of running the property, before the loan. The OCC's Comptroller's Handbook on commercial real estate lending defines the DSCR this way. Example: $36,000 of rent, 5% vacancy ($1,800) and $7,200 of operating expenses leave $27,000 of NOI; against $25,171.72 of loan payments the DSCR is 1.07.

If your NOI expenses already include the property taxes and insurance, do not add them again: on the NOI tab the debt service is the principal and interest only.

What DSCR lenders look for

Every lender sets its own minimum DSCR, and it can change with the loan program, the property type, the loan to value, your credit and reserves, and the market. The bands on this page are a reading aid, not a rule: below 1.00 the rent does not cover the payment, 1.00 to 1.24 is thin, and 1.25 and up leaves a wider cushion.

The OCC tells bank examiners that an appropriate DSCR depends on the amortization period and how volatile the cash flow is: a lower ratio may be acceptable with a shorter amortization or very stable tenants, and properties with uneven income, such as hotels, may warrant a higher one. Ask the lender which rent it counts (the lease, or a market rent estimate), which costs go in, and what minimum it uses, then put that minimum in the target field.

The largest loan the rent supports

Turn the formula around. On the lender tab, rent ÷ target DSCR is the most PITIA the rent supports; take off taxes, insurance and HOA and the rest is the most principal and interest. On the NOI tab, NOI ÷ target is the most debt service a year. That payment, at your rate and term, repays a loan of payment × (1 − (1 + r)^−n) ÷ r, or payment ÷ r when it is interest-only.

With $3,000 of rent, $475 of taxes and insurance and a 1.25 target: $3,000 ÷ 1.25 = $2,400; $2,400 − $475 = $1,925 a month; at 7.5% over 30 years that repays about $275,309. The lender's loan to value limit and the appraisal also cap the loan, and the smaller of the limits wins.

What this calculator does not do

It does not know any lender's rules: which rent they accept, how they treat a short-term rental, whether they add a vacancy factor, or their minimum DSCR, loan to value and reserve rules. It does not include closing costs, points, rate buydowns or a prepayment penalty, and it assumes a fixed rate. Use it to screen a rental and to have a sharper conversation with the lender, not as a loan approval.

Sources, read on 2026-10-25:

• OCC, Comptroller's Handbook: Commercial Real Estate Lending, version 2.0 (March 2022), "Debt-Service Coverage Ratio", p. 43
• CFPB, On a mortgage, what's the difference between my principal and interest payment and my total monthly payment?

Screening the whole deal? The cap rate calculator works out NOI ÷ price and cash on cash return, the NPV calculator discounts the cash flows over the hold, and the home sale proceeds calculator shows what you net when you sell.

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