Financial
Debt Service Coverage Ratio (DSCR)
A ratio used primarily in investment property lending that compares the property's rental income to its total debt obligations. A DSCR of 1.25 means the property generates 25% more income than needed to cover the mortgage payment. Lenders typically require a DSCR of 1.2 or higher for investment property loans. This metric helps determine whether a rental property can sustain itself financially.
Why It Matters
Debt Service Coverage Ratio (DSCR) directly affects how much you pay for your home and how you build wealth through homeownership. Understanding the financial mechanics of your mortgage helps you make choices that save money over the long term.
Use mortgage calculators to see how debt service coverage ratio (dscr) impacts your specific numbers. Even small differences in financial terms can add up to tens of thousands of dollars over the life of a 30-year mortgage.