Measures a mortgaged property’s ability to cover monthly payments to the lender. The formula is: NOI (or Cash Flow Available For Debt Service) as the numerator and annual debt service as the denominator. Please note that the higher the ratio the more secure the lender will be, and a DSCR of less than 1.0 means that there is insufficient cash flow generated by the property to cover required debt payments.
All income producing property loans are evaluated in the same manner. The DSCR is the ratio of income to debt service (payment). DSCRs range from a low of 1.20:1 (80% of the Net Operating Income) to 1.40:1 (60% of the Net Operating Income), depending on collateral type.
Cash flow determines how much money can be safely loaned on a property, or how much debt the property can support. This is done through the use of a debt service coverage ratio (DSC). The debt service coverage ratio is the net operating income (NOI) divided by the debt service or regular annual mortgage payments (principal plus interest).
Measures a mortgaged property’s ability to cover monthly payments. The formula to determine DSCR is Net Operating Income divided by Annual Debt Service. A DSCR of less than 1.0 means that there is insufficient cash flow generated by the property to cover required debt payments.
Net Profit plus (+) Depreciation plus (+) Amortization plus (+) Interest Expense divided by (÷) Current Portion of Existing plus (+) Proposed Debt.
(DSCR) The relationship between the annual net operating income of a property and the annual debt service of the mortgage loan or property. Both lenders and investors calculate this ratio to determine the likelihood of the property to generate enough income to repay the loan. From the lenders point of view the higher the ratio the better.
measures a mortgaged property's ability to cover monthly payments defined as the ratio of net operating income over the periodic payments (principal and interest) made on a loan. A DSCR of less than 1.0 means that there is insufficient cash flow generated by the property to cover required debt payments.
The ratio of cash flow available to pay for debt to the total amount of debt payments to be made. A ratio of 1.0 means breakeven. Most lenders look for a ratio of 1.20 or higher.
A 1.0 means breakeven. The ratio is calculated by taking the net operating income and dividing it by the mortgage payments. Most lenders look for a ratio of 1.25 or higher.
The ratio between a property's net operating income and its debt service/loan payment. A ratio amount established and used by lenders to determine a maximum loan amount.
The relationship between the annual net operating income (NOI) of a property and the annual debt service of the mortgage loan on the property. Both Lenders and Investors calculate this ratio to assist them in determining the likelihood of the property generating enough income to pay the mortgage payments. From the lender's viewpoint, the higher the ratio, the better.
The ratio calculated by dividing the property's cash flow available for debt service by the annual principal and interest requirements. ('DSC')
The annual net operating income from a property divided by annual cost of debt service. A DSCR below 1 means the property is generating insufficient cash flow to cover debt payments.
The sum of net income, interest expense, and depreciation and amortization, divided by the sum of current maturities of long-term debt and interest expense. This ratio indicates the facility’s ability to meet its principal and interest payments on long-term debt. A value of 1.00 or more means that the facility is meeting its debt requirements.
The debt service coverage ratio, or debt service ratio, is the ratio of net operating income to debt payments on a piece of investment real estate. The higher this ratio is, the easier it is to borrow money for the property. The phrase is also used in corporate finance and may be expressed as a minimum ratio that is acceptable to a lender; it may be a loan condition, a loan covenant, or a condition of default.
