DSCR Loan Calculator

By Cesar Soto, Chase Davis, Dmytro Gladchenko, and Heather Hurst

The Multifamily Group’s DSCR loan calculator is essential for real estate investors looking to assess their debt service coverage ratio (DSCR). Whether you’re financing a multifamily property, SFR portfolio, or commercial real estate, this calculator helps determine the income-to-debt relationship necessary for loan qualification. By inputting key financial figures, users can instantly see their DSCR and evaluate their loan eligibility.

Unlike traditional mortgage applications, DSCR loans focus on property income rather than personal income. This makes them a popular choice for investors looking to scale their portfolios efficiently. Our calculator helps you pinpoint where your income and expenses should be to meet lender requirements and maximize returns.

How is DSCR Calculated?

What is the simple formula for Debt Service Coverage Ratio?

The formula for Debt Service Coverage Ratio (DSCR) is:

DSCR = Net Operating Income (NOI) / Total Debt Service

Where:

• Net Operating Income (NOI) = Gross Rental Income – Operating Expenses
• Total Debt Service = Principal + Interest Payments on Debt

For example, if a property generates $120,000 in annual NOI and has $90,000 in annual debt service, the DSCR would be:

DSCR = $120,000 / $90,000 = 1.33

A DSCR of 1.33 means the property earns 33% more than the required debt obligations, making it a safer investment for lenders.

What is a Good Range for DSCR?

What is the ideal DSCR rate?

Most lenders require a minimum DSCR of 1.20-1.25 to approve a loan, meaning the property must generate at least 20-25% more income than the debt payments. However, some lenders may allow lower DSCRs (around 1.10) for well-qualified borrowers, while higher-risk properties may require 1.40 or more.

What is the Ideal DSCR Rate for a Loan?

• 1.00 or Below – Insufficient income to cover debt (high risk)
• 1.10 – 1.20 – Minimal buffer, possible loan approval with higher interest rates
• 1.25 – 1.40 – Preferred range for most lenders
• 1.50+ – Strong financial cushion, more favorable loan terms

What is the downside of the DSCR loan?

While DSCR loans offer flexibility by prioritizing rental income over personal income, they often come with:

• Higher interest rates compared to traditional loans
• Larger down payment requirements (typically 20-25%)
• Stricter cash flow requirements for investors with multiple properties

DSCR Calculator for Real Estate

How much can I borrow on a DSCR loan?

Lenders determine maximum loan amounts based on the DSCR ratio, ensuring the property generates enough income to cover debt payments. Use our DSCR loan calculator to estimate borrowing power by adjusting:

• Property income
• Debt obligations
• Interest rates

Example Calculation:

• NOI: $150,000
• Debt Service: $100,000
• DSCR: 1.50 (Strong Ratio)

A higher DSCR may qualify you for better loan terms, while a lower DSCR could result in stricter conditions or loan denial.

DSCR Calculator for Rental Property

How is DSCR calculated for rental property?

For rental properties, lenders assess rental income stability alongside DSCR. Calculation steps:

1. Determine Gross Rental Income (Monthly Rent x 12)
2. Subtract Operating Expenses (Property Taxes, Maintenance, Insurance)
3. Divide by Annual Debt Service (Mortgage Principal & Interest)

Example:

• Monthly Rent: $3,000
• Annual Income: $36,000
• Expenses: $10,000
• Net Income: $26,000
• Debt Service: $20,000
• DSCR = 1.30 (Loan Eligible)

DSCR Refinance Calculator

Refinancing with a DSCR loan allows investors to tap into equity while maintaining a strong income-to-debt balance. Use the calculator to:

• Compare current DSCR vs. post-refinance DSCR
• Adjust loan terms to optimize cash flow
• Evaluate property income growth potential

Why Use Our DSCR Loan Calculator?

• Instant results for informed decision-making
• Customizable inputs for various investment scenarios
• Guidance on improving DSCR to secure better loan terms

FAQ

Do DSCR loans require 20% down?

Yes, most DSCR loans require a 20-25% down payment, though some lenders may allow lower or higher amounts based on the borrower’s risk profile.

Are DSCR loans hard to get?

DSCR loans are easier to qualify for than traditional loans since they focus on property income, but lenders often require a strong rental income and DSCR above 1.20.

How much are closing costs on a DSCR loan?

Closing costs typically range from 3-6% of the loan amount, including lender fees, appraisal costs, and title insurance.

Can you pay off a DSCR loan early?

Yes, but some lenders impose prepayment penalties or yield maintenance fees, so it’s essential to check the loan terms.

Who offers DSCR loans?

DSCR loans are available from private lenders, mortgage brokers, credit unions, and non-bank financial institutions specializing in real estate investment financing.

Does a DSCR loan require an appraisal?

Yes, lenders require an appraisal to determine property value and rental income, ensuring the DSCR meets the loan requirements.

Final Thoughts

The Multifamily Group’s DSCR loan calculator is a powerful tool for investors seeking strategic financing solutions. Whether buying, refinancing, or expanding a rental portfolio, understanding DSCR ratios is key to long-term investment success. Try our calculator today and take control of your real estate financing!