DSCR (Debt Service Coverage Ratio)

Category: science

A financial metric comparing a property's net operating income to its annual mortgage debt service.

DSCR is the primary safety metric used by commercial lenders ($DSCR = NOI / Annual\ Debt\ Service$). A DSCR of 1.0 means the property generates exactly enough cash to pay its mortgage. Lenders typically require a minimum DSCR of 1.25 to 1.35, providing a 25-35% cash cushion to protect the loan against sudden vacancies or collection losses.

Common Examples

• The regional bank rejected the refinancing package because the property's lower occupancy dropped our projected DSCR to one-point-one.
• Maintaining a strong debt service coverage ratio protects our equity positions from foreclosure risk during regional economic downturns.