Debt Service Coverage Ratio (DSCR) Calculator
From net operating income and total debt service, compute the DSCR — the ability to cover debt payments from operating income.
Input Data
Results
At a glance:DSCR = NOI / total debt service (principal + interest). NOI = revenue minus operating expenses, before debt service. >1 = income covers debt (safer); =1 = break-even (no buffer); <1 = insufficient (needs subsidy, high default risk). Lenders require a minimum (e.g. 1.2-1.25) as a covenant. WARNING: Definitions vary — numerator NOI/EBITDA/cash flow; denominator interest-only or P+I, sometimes lease. This tool uses NOI/(P+I). Education, not advice.
Formula
DSCR = net operating income (NOI) / total debt service.
Total debt service = principal + interest.
$$\text{DSCR} = \dfrac{\text{Net Operating Income (NOI)}}{\text{Total Debt Service}}$$$$\text{Total Debt Service} = \text{Principal} + \text{Interest}$$How to Use
- Enter the net operating income (after operating expenses, before debt).
- Enter the period's total debt service (principal + interest).
- View the DSCR.
FAQ
What DSCR is acceptable, and what do banks require?
DSCR > 1 is the basic threshold; banks usually want a buffer, commonly 1.2-1.25x, sometimes 1.3-1.4 for riskier loans. At =1 there is zero margin. Requirements vary by loan type, collateral, borrower credit, industry stability and the economy. A covenant often requires maintaining a minimum DSCR; breaching it can trigger default. Compare with your lender's requirement.
Should the numerator be NOI, EBITDA or cash flow?
It depends on the loan and lender, but the key is consistency with the denominator. For property loans, NOI is standard (rent minus operating costs, before debt service/tax/depreciation). For corporate/project finance, EBITDA is common; stricter uses operating or distributable cash flow. Never use net profit as the numerator — it already deducts interest and tax, understating debt capacity. This tool uses NOI; if your lender wants EBITDA, enter that figure as the numerator.
Should the denominator be interest-only or principal + interest?
Most complete is principal + interest (the borrower actually pays both), so NOI/(P+I) reflects true coverage — standard for property loans. Some use interest-only (closer to 'interest coverage') for interest-only/bullet loans. Including principal lowers DSCR significantly; always confirm thebasis when comparing. This tool uses P+I.
How is DSCR different from DSR, and which does HK mortgages use?
DSCR is for commercial/property/business: numerator is the property/business NOI, denominator debt service, in multiples (higher is safer, ~1.2+). DSR (Debt Servicing Ratio) is for personal mortgages: monthly payment / monthly income, in percent (lower is safer). HKMA caps self-use mortgage DSR at ~50% (40% with other mortgages), with a stress test. For investment-property or corporate loans, banks add DSCR. They may apply both.
How do I improve DSCR to meet the bank?
Raise the numerator (NOI/cash flow) or lower the denominator (debt service). Raise NOI: increase rent (vs market, fill vacancies, add income like parking/ads) or cut operating costs. Lower debt service: put more down (lower loan), extend the term (lower instalment), negotiate a lower rate, or use interest-only. Banks often ask for more equity. Do not flatter NOI or understate costs — they verify, and DSCR must be maintained.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.