Calculation Results
About This Calculator
Calculate Debt Service Coverage Ratio (DSCR), annual debt service, net operating income (NOI), and maximum loan supportable by commercial property lenders.
Frequently Asked Questions
What is Debt Service Coverage Ratio (DSCR) in commercial real estate?
DSCR is the ratio of Net Operating Income (NOI) produced by a commercial real estate property to its annual mortgage principal and interest debt service. A ratio above 1.0 means the property generates enough cash to pay its mortgage.
What DSCR do commercial banks and lenders require?
Most commercial banks, Fannie Mae DUS lenders, and life insurance companies require a minimum DSCR between 1.20x and 1.35x. Specialized properties like hotels or gas stations may require 1.40x to 1.50x to cushion against revenue fluctuations.
How does a lender determine the maximum loan amount from DSCR?
Lenders divide annual NOI by their required DSCR target (e.g. $250,000 / 1.25 = $200,000 max allowable annual debt service). They then calculate the present value of that annual payment over the loan amortization period at the prevailing note rate.
Can personal income cover a commercial DSCR shortfall?
For commercial DSCR loans and SBA loans, recourse guarantees allow personal business income to bolster debt service; however, non-recourse CMBS or agency loans rely strictly on property cash flows.