DSCR Loan Calculator

How this calculator works

Debt service coverage ratio loans qualify on the property's income instead of your personal income. Lenders measure it two different ways. Residential DSCR lenders for 1-4 unit rentals usually divide the qualifying monthly rent by the full monthly payment including taxes, insurance and HOA (PITIA). Commercial lenders divide net operating income by the yearly loan payments.

The two methods produce different numbers for the same property, so this calculator keeps them separate. Cash flow is shown on its own line, because a loan can meet the DSCR minimum and still lose money after vacancy, management and repairs.

Residential DSCR = qualifying rent ÷ (principal and interest + taxes + insurance + HOA).
Commercial DSCR = NOI ÷ annual debt service, where NOI = effective gross income − operating expenses.
Maximum loan is the smaller of the DSCR limit and the loan-to-value limit; the binding one is labeled.
Reserves are cash you must hold, not an expense, so they appear under cash needed, not in cash flow.

Worked example

Example values are illustrative, not quotes or market data. These are the numbers the calculator above starts with.

Inputs

DSCR method: Residential investor loan: rent ÷ PITIA
Price or value: $300,000
Down payment: $75,000 (25%)
Interest rate: 7.5%
Amortization: 30 years
Monthly rent: $2,600
Property taxes per year: $6,000
Insurance per year: $2,400
Vacancy and credit loss: 5%
Property management (% of rent): 8%
Repairs and maintenance per year: $1,800
Capital reserves per month (roof, HVAC): $150
Minimum DSCR required: 1
Maximum loan-to-value: 80%
Points: 1%
Other closing costs: $6,000
Reserves required (months of PITIA): 6

Results

Method: residential
DSCR: 1.14
Monthly cash flow: -$311
Max loan: $240,000 (LTV)
Cash to close: $83,250
Reserves: $13,639

Common questions

What DSCR do lenders require?

It varies by lender and program. Many residential DSCR lenders price loans at a ratio of 1.0 or higher, and commercial lenders often want 1.20 to 1.35. Check with the lender.

Do DSCR loans have prepayment penalties?

Many do, often a step-down such as 5-4-3-2-1 percent of the balance by year. Enter the schedule from the term sheet.

Which rent does the lender use?

Usually the lease rent or the appraiser's market rent estimate, often the lower of the two. Some lenders count only part of it.

Related calculators

Estimate only. Actual loan terms, eligibility, insurance, taxes, and settlement charges require verification. These are planning estimates, not a lender Loan Estimate, Closing Disclosure, appraisal, or approval. Michael O'Neal is a real estate broker, not a lender, appraiser, attorney or tax adviser.