Commercial mortgage underwriting
Debt-Service Coverage Ratio (DSCR)
DSCR compares a property or business cash-flow measure used by the lender with the debt service that must be paid over the same period.
Basic formula
DSCR = qualifying cash flow ÷ debt service
Educational definitionNo universal lender threshold is implied.
Why it matters in commercial financing
It helps describe the margin between qualifying cash flow and required debt payments. The exact numerator, adjustments, required coverage and treatment of expenses vary by lender, asset and transaction.
Important cautions
- Do not assume one universal minimum DSCR.
- Confirm how the lender defines qualifying cash flow.
- Use the same time period for cash flow and debt service.
- Stress-testing may differ from the current contractual payment.
Discuss a real transaction
Move from the metric to the property and financing objective.
Worked DSCR example
Using illustrative annual figures, $150,000 of qualifying cash flow divided by $120,000 of debt service gives DSCR of 1.25. If cash flow falls to $120,000 with debt service unchanged, the ratio becomes 1.00. These examples show the arithmetic, not a lender’s minimum. Confirm the accepted income measure, debt obligations and time period before comparing the result.
Further reading
Content reviewed September 9, 2026. These resources provide background; individual lender requirements and property circumstances differ. Illustrative calculations are examples, not financing offers.