DSC
Debt Service Coverage. See Debt Service Coverage Ratio.
Frequently Asked Questions about Debt Service Coverage (DSC)
What does DSC stand for in real estate finance?
DSC stands for Debt Service Coverage. It refers to the ability of a property’s income to cover its debt payments. It is most commonly used in the form of the Debt Service Coverage Ratio (DSCR).
What is the Debt Service Coverage Ratio (DSCR)?
The DSCR is calculated by dividing a property’s Net Operating Income (NOI) by its annual debt service. It measures how many times a property’s income can cover its debt obligations.
Why is DSCR important to lenders?
Lenders use DSCR to evaluate the risk of a loan. A higher DSCR indicates that the property generates enough income to comfortably pay its debt service, reducing the risk of default.
What is a typical DSCR minimum required by lenders?
While requirements vary, most commercial lenders look for a DSCR of at least 1.20x. This means the NOI is 20% greater than the annual debt service.
Is DSC the same as DSCR?
DSC refers broadly to the concept of debt service coverage, while DSCR is the specific ratio used to quantify it. In practice, the terms are often used interchangeably.
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