DSCR Calculator: Debt Service Coverage for Rentals
Free DSCR calculator for rental properties. Learn both DSCR formulas lenders use, what a good DSCR is, and how to raise one that falls short of 1.25.
By Real-Estate Analyzer Team · Updated
The debt service coverage ratio (DSCR) tells you whether a rental's income covers its mortgage, and by how much. It is the number lenders look at first, and for DSCR loans, which qualify you on the property's income instead of your salary, it can decide whether you get the loan at all.
Below is a free DSCR calculator, the two different formulas lenders use (most guides only mention one), a worked example, and what to do when your deal comes in below 1.25.
DSCR Calculator
Enter the price, down payment, rate, rent, and monthly operating expenses (taxes, insurance, maintenance, management, vacancy). The calculator uses the NOI-based DSCR and assumes a 30-year amortizing loan.
Expenses = taxes, insurance, maintenance, management, vacancy (not the mortgage). Assumes a 30-year loan and 3% closing costs.
This deal keeps $187.46 a month. The analyzer tests what happens if the numbers don't hold.
Stress-test this dealThe DSCR Formula (Two Versions)
This is the classic version used by commercial and multifamily lenders. NOI is rent minus vacancy and every operating expense. Debt service is the full year of mortgage payments (principal and interest).
Many residential DSCR loan lenders (for 1–4 unit rentals) use a simpler version instead:
PITIA is principal, interest, taxes, insurance, and HOA dues. It leaves out maintenance, management, CapEx, and vacancy, so the same property produces a higher DSCR under this formula. Always ask your lender which version they use.
Worked Example: Same Deal, Two DSCRs
The sample $240,000 rental from our guides: $2,300/month rent, a $180,000 loan at 7% over 30 years ($1,197.54/month), $250/month property tax, and $110/month insurance.
The lender sees 1.48 and approves. As an investor you should care about the 1.16: after maintenance, CapEx, management, and vacancy, the property covers its mortgage with only 16% to spare. That is about $187 a month, as our stress test guide shows.
What Is a Good DSCR?
- Below 1.00: the property doesn't cover its debt. You pay the shortfall every month.
- 1.00–1.19: breaks even or close to it. Some DSCR lenders will lend here (often at a higher rate or a lower LTV), but there is little room for error.
- 1.20–1.25: the common minimum for multifamily and commercial loans, and the comfort zone for many residential DSCR programs.
- 1.35+: a healthy cushion. The property can absorb a rent dip or a vacant month without you topping it up.
Lender minimums vary by program, LTV, and credit score, and they change with market conditions. Treat these as starting points and confirm with your lender.
How to Raise a DSCR That Falls Short
Using the sample deal (NOI-based DSCR of 1.16), here is what each lever does:
| Change | DSCR |
|---|---|
| Base: 25% down, 7%, 30-yr | 1.16 |
| Rate bought down to 6% | 1.28 |
| Interest-only loan | 1.32 |
| 40% down | 1.45 |
| 20% down | 1.08 |
| 15-year loan | 0.86 |
Beyond financing, you can negotiate the price down (smaller loan), raise rent to market after the current lease ends, or cut expenses, for example by re-shopping insurance or appealing the tax assessment. The analyzer's Negotiator tab works out the price or rent you would need to hit a target.
Work Backwards: How Big a Loan Will the Property Support?
Lenders often size the loan from the DSCR, not the other way round. Maximum annual debt service = NOI ÷ required DSCR. On the sample deal's $16,620 NOI:
| Required DSCR | Max payment/mo | Max loan (7%, 30 yr) | As % of $240k |
|---|---|---|---|
| 1.20 | $1,154 | $173,480 | 72% |
| 1.25 | $1,108 | $166,540 | 69% |
| 1.35 | $1,026 | $154,204 | 64% |
At a 1.25 requirement, the $180,000 loan is too large; the lender would cap it near $166,500, so you would bring about $13,500 more cash. The other route is more rent: the deal passes 1.25 at roughly $2,418/month (a 5% increase), which is where the analyzer's Negotiator tab is useful for finding the price or rent that gets you there.
DSCR Loans in Brief
A DSCR loan qualifies you on the property's rent rather than your personal income. That is useful if you are self-employed, already own several properties, or your tax returns show low income because of depreciation. Typical trade-offs compared with a conventional mortgage:
- Higher interest rates, often around 0.5–1.5 points more
- Larger down payments, typically 20–25% or more
- Prepayment penalties are common
- Cash reserves of several months of PITIA are often required
Because the rate is higher, check that the deal still works at the DSCR-loan rate, not the conventional rate you saw advertised. Our guide to how mortgage terms affect returns shows the effect of each rate step.
Key Takeaways
- 1DSCR = NOI ÷ annual debt service. Above 1.0 means the property covers its mortgage.
- 2Many DSCR-loan lenders use rent ÷ PITIA instead, which gives a higher number for the same property.
- 31.20–1.25 is a common lender minimum; 1.35+ gives a comfortable cushion.
- 4A bigger down payment, rate buydown, or interest-only period raises DSCR; a 15-year term lowers it sharply.
- 5Judge the deal on the NOI-based DSCR even if the lender approves on the rent ÷ PITIA version.
Play with this exact example
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About these guides
A small team of investors. Every worked example in our guides is calculated with the same engine the analyzer runs. How we check our numbers. Educational content, not tax, legal, or investment advice.