NOI ÷ Annual debt service
Reading the ratio
- Below 1.0 — NOI does not cover the mortgage; the owner must contribute cash.
- Exactly 1.0 — NOI just covers debt service with no cushion.
- Above 1.0 — NOI exceeds debt service; the higher the ratio, the more room for surprises.
Lenders that underwrite on DSCR set their own minimums and definitions — some include taxes and insurance in debt service, some use market rent instead of in-place rent. Ask each lender how they calculate it.
Example
NOI of $18,000 and annual debt service of $14,969 gives DSCR of 1.20. Raise the down payment so debt service falls to $11,975 and DSCR rises to 1.50.
What moves DSCR
- Higher rent or lower vacancy (raises NOI)
- Lower operating expenses (raises NOI)
- Larger down payment (lowers debt service)
- Lower interest rate or longer amortization (lowers debt service)
Sources & Further Reading
- Consumer Financial Protection Bureau — Buying a house: loan estimates and closing disclosures. www.consumerfinance.gov/owning-a-home/
- Federal Reserve Bank of St. Louis (FRED) — 30-Year Fixed Rate Mortgage Average in the United States. fred.stlouisfed.org/series/MORTGAGE30US
Sources accessed for review on October 5, 2026. Laws, rates, and programs change — confirm current details at the source.
713 Metrics provides educational and informational tools and content. Nothing on the platform constitutes financial, investment, tax, legal, lending, appraisal, brokerage, insurance, or real-estate advice. Users should independently verify information and consult appropriate licensed professionals.