What Is DSCR?

Debt service coverage ratio tells an investment-property lender whether a building's income can comfortably pay for its own mortgage. The formula is simple: net operating income divided by annual debt service. A ratio of 1.25 means the property throws off $1.25 of income for every $1.00 of loan payment — the industry-standard cushion for residential rentals.

Why Lenders Insist on Coverage

A property with a DSCR below 1.0 cannot pay its mortgage from its own rents, which means the owner must subsidize it from personal income. Lenders treat that as elevated risk, so they set minimums — usually 1.25 residential and 1.30 commercial — to ensure a realistic buffer for vacancies, repairs, and rate increases.

What the Max Payment Tells You

The calculator also shows the maximum mortgage payment your NOI can support at the lender minimum. If your target payment exceeds that number, you will need a smaller loan, a lower rate, or a larger down payment to keep the property self-sustaining.