DSCR
See Debt Service Coverage Ratio
Frequently Asked Questions about Debt Service Coverage Ratio (DSCR)
What does DSCR stand for?
DSCR stands for Debt Service Coverage Ratio. It measures a property’s ability to generate enough income to cover its debt obligations.
How is DSCR calculated?
DSCR = Net Operating Income (NOI) ÷ Total Debt Service. The ratio indicates how many times income covers the debt payments.
Why is DSCR important in real estate finance?
DSCR is a key risk metric used by lenders and investors to assess whether a property can meet its debt obligations from operating income.
What DSCR do lenders typically require?
Lenders generally require a DSCR of at least 1.20x, meaning the property generates 20% more income than is needed to cover debt payments.
How does DSCR compare to Debt Yield?
Both are lender risk metrics. DSCR measures income relative to annual debt payments, while Debt Yield = NOI ÷ Loan Amount and reflects return on the lender’s capital.
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