DSCR Calculator
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DSCR1.25
ResultPasses
Cash Flow After Debt$12,000.00
The DSCR Calculator measures how comfortably a property's income covers its loan payments by dividing net operating income by annual debt service. DSCR lenders use this single ratio to qualify investment loans without checking personal income, so a value at or above the threshold you set tells you the deal likely qualifies. Enter the annual NOI, the annual mortgage payments, and your lender's minimum to see the ratio and the cash left over after debt.
Formula
DSCR = annual NOI / annual debt service
- NOI
- Net operating income: gross rent minus operating expenses, excluding the mortgage
- debt service
- Total annual principal and interest payments on the loan
How it works
- Enter the annual net operating income (rental income minus operating expenses, before any mortgage payment) and the annual debt service (twelve months of principal and interest).
- Set the lender DSCR threshold; most DSCR loan programs require at least 1.25, though some accept 1.0 or even 0.75 with pricing adjustments.
- The calculator divides NOI by debt service to produce the ratio, compares it to your threshold, and shows the annual cash flow remaining after the loan is paid.
Worked example
A rental nets $60,000 in NOI per year and the loan costs $48,000 a year, with a lender requiring 1.25.
- DSCR = 60,000 / 48,000 = 1.25.
- The ratio equals the 1.25 threshold, so it passes.
- Cash flow after debt = 60,000 - 48,000 = $12,000.
DSCR of 1.25, which passes the threshold, leaving $12,000 of annual cash flow.
Frequently asked questions
- What DSCR do lenders typically require?
- Most DSCR loan programs want a ratio of 1.25 or higher, meaning income exceeds the loan payment by 25%. Some lenders fund deals down to 1.0, and a few allow sub-1.0 ratios with larger down payments or higher rates.
- Does net operating income include the mortgage payment?
- No. NOI is calculated before financing, so it subtracts operating costs like taxes, insurance, maintenance, and management but never the mortgage. The mortgage shows up separately as the debt service in the denominator.
- What does a DSCR below 1.0 mean?
- A ratio under 1.0 means the property does not generate enough income to cover its own loan payments, so you would need to add cash each year. Lenders treat this as negative cash flow and most decline to fund it.
- Why do DSCR loans skip personal income verification?
- A DSCR loan qualifies on the property's cash flow rather than the borrower's W-2 or tax returns. As long as the rental income covers the debt at the required ratio, the lender is comfortable, which is why investors favor these loans.