On most commercial and rental files, one number does a lot of the deciding: the DSCR, or debt service coverage ratio. It tells a lender whether the property's income can carry the financing. Understand it and you understand how your deal will be read. Here is the plain-language version.
NOI: the property's income after operating costs, before financing.
A full year of mortgage payments, principal and interest.
NOI divided by debt service. Above 1.0 means income covers the payments.
Lenders usually want income above the payments by a margin, not just barely covering.
Illustrative example: a property nets $120,000 a year and the financing costs $100,000 a year, so the DSCR is 1.2. Income covers the payments with a 20 percent cushion. The higher the number, the more comfortable the lender. Figures are illustrative only.
Better occupancy, market rents at renewal, or trimming operating costs lift NOI.
More equity, a longer amortization (the years to repay), or a different structure can lower annual debt service.
Clear financials and leases let a lender credit the income you actually have.
Bring us the property's income and the financing you are considering, and we will work out the coverage and what it means for your file. A licensed member of our commercial team will follow up.
Start a conversationInformation here is general and educational. It is not financial, legal, or lending advice, and it is not an offer of financing. DSCR requirements and how income and debt service are calculated vary by lender, property, and program. The example shown is illustrative only and is not a quote or a representation of any specific deal. Any figures or ratios are illustrative only. All financing is subject to lender review, property review, and supporting documentation. Submission of a form does not guarantee approval or financing.