Free tool
DSCR and loan sizing calculator
Enter the property’s NOI and the loan terms. Get the monthly payment, annual debt service, DSCR and debt yield — and the largest loan the NOI supports at your lender’s minimum DSCR.
Updated
Property and loan
Use the NOI the lender will underwrite, usually trailing 12 months.
1 to 40 years, monthly payments
The minimum in your lender's term sheet; 1.25x here is only an example.
DSCR
1.22x
Debt yield
9.29%
Annual debt service
$530,937
Monthly payment
$44,244.76
Maximum loan at 1.25x DSCR
$6,855,802
Supports up to $520,000 of annual debt service at this rate and amortization.
DSCR is below your 1.25x minimum: at these terms the loan is larger than the NOI supports.
For illustration, not advice. DSCR = NOI ÷ annual principal and interest; debt yield = NOI ÷ loan amount. Monthly payments, fixed rate, no fees or reserves. Lenders size on several tests at once — DSCR, debt yield and loan-to-value — and lend the lowest; their NOI and terms decide the real answer.
The DSCR formula
The debt service coverage ratio (DSCR) is a property’s net operating income divided by its annual debt service — principal and interest for twelve months. At 1.00x the property exactly pays its loan; above it, the excess is the cushion the lender is looking for.
- DSCR = NOI ÷ annual debt service
- Debt yield = NOI ÷ loan amount
- Maximum debt service = NOI ÷ minimum DSCR, then the loan whose payments equal it
The monthly payment on an amortizing loan is loan × r ÷ (1 − (1 + r)−n), where r is the annual rate divided by 12 and n is the number of monthly payments.
A worked example
A property earns $650,000 of NOI. The buyer wants a $7,000,000 loan at 6.5% with 30-year amortization. The monthly payment is about $44,244.76, so annual debt service is about $530,937.
- DSCR = $650,000 ÷ $530,937 = 1.22x
- Debt yield = $650,000 ÷ $7,000,000 = 9.29%
- At a 1.25x minimum, the most debt service allowed is $650,000 ÷ 1.25 = $520,000 a year, which supports a loan of about $6,855,802 on the same terms.
The requested loan is about $144,000 too large for a 1.25x lender. The buyer either brings more equity, finds a lender with a lower minimum, or negotiates a period of interest-only payments — at 6.5% interest-only, debt service is $455,000 and DSCR is 1.43x.
Lenders size on more than one test
Lenders commonly test DSCR, debt yield and loan-to-value (LTV) together and lend the lowest answer. Say the property is valued at $10,000,000 — a 6.5% cap rate on the same NOI, as in the cap rate calculator — and the lender’s limits are 70% LTV, 1.25x DSCR and a 9% debt yield:
| Test | Calculation | Maximum loan |
|---|---|---|
| LTV 70% | 70% × $10,000,000 | $7,000,000 |
| DSCR 1.25x | $520,000 a year of debt service | $6,855,802 |
| Debt yield 9% | $650,000 ÷ 0.09 | $7,222,222 |
| Loan offered | Lowest of the three | $6,855,802 |
Here DSCR binds. When rates rise, it usually binds sooner, because the same NOI supports a smaller payment-based loan while LTV and debt yield do not move.
After closing: DSCR as a covenant
Many loans require the property to keep passing a DSCR test, often quarterly or annually on trailing NOI. In the example, a 10% drop in NOI to $585,000 takes the amortizing loan to about 1.10x. Read the loan’s definitions — which NOI, which period, actual or hypothetical debt service — before you rely on a number. In CREAssets the underwriting workbook includes a financing sheet with loan sizing and sensitivities, and the fund-admin workspace tracks debt and covenant tests on the deal. See AI underwriting and fund administration.
Related calculators
- NOI calculator
From gross potential rent, vacancy, other income and operating expenses: effective gross income, NOI and the expense ratio.
- Cap rate calculator
Enter any two of NOI, value and cap rate to get the third, with the value at nearby cap rates.
- Break-even occupancy calculator
Operating expenses plus debt service over gross potential income — and the cushion against today’s occupancy.
- Gross rent multiplier (GRM) calculator
Price over gross annual rent, or the price a GRM implies — a quick screen before you underwrite NOI.
DSCR and loan sizing questions
How is DSCR calculated?
Divide net operating income by annual debt service — twelve months of principal and interest. $650,000 of NOI against $530,937 of debt service is a DSCR of 1.22x: NOI covers the payments 1.22 times.
What DSCR do lenders require?
There is no single number. Each lender sets a minimum DSCR by property type and loan program, and riskier properties need more coverage. Use the figure in your term sheet; the 1.25x default in this calculator is an example, not a market figure.
What is the difference between DSCR and debt yield?
DSCR is NOI over debt service, so it moves with the interest rate and amortization. Debt yield is NOI over the loan amount and ignores both. Lenders use debt yield as a check that does not depend on today’s rate.
How do I find the maximum loan from a DSCR?
Divide NOI by the minimum DSCR to get the most debt service the lender allows, then find the loan whose payments equal it at the loan’s rate and amortization. At 1.25x, $650,000 of NOI supports $520,000 a year of debt service — about $6,855,802 at 6.5% over 30 years.
Does interest-only change the DSCR?
Yes. Interest-only payments are lower than amortizing payments, so DSCR is higher while they last. Lenders often size on an amortizing payment anyway, and coverage drops when amortization starts.
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