Financing
DSCR Loan Calculator
Check debt service coverage ratio and find the max loan a lender will approve.
Loan breakdown
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How rental property returns work
A DSCR loan is a type of investment property financing where the lender qualifies the loan based on the property cash flow, not your personal income. DSCR stands for debt service coverage ratio — the ratio of the property rental income to its total housing payment. Because the property qualifies itself, DSCR loans are popular with investors who own multiple properties or have complex tax returns that make traditional mortgages difficult. The lender calculates your PITIA — principal, interest, taxes, insurance, and HOA — and compares it to the monthly rent. The formula is DSCR = monthly rent divided by PITIA. A DSCR of 1.0 means the rent exactly covers the housing payment. A DSCR above 1.0 means the property generates more income than the loan requires; below 1.0 means it falls short. Most DSCR lenders require a minimum of 1.20 to 1.25, meaning the rent must exceed the PITIA by 20–25%. The calculator computes your monthly principal and interest using standard amortization, adds taxes, insurance, and HOA to get PITIA, then divides rent by PITIA to find your DSCR. It also shows a pass/fail indicator against your target DSCR so you know whether the loan qualifies. If your DSCR falls short, the calculator solves for the maximum loan amount that would meet your target DSCR. It does this by back-solving the amortization formula: given the target PITIA (rent divided by target DSCR), subtract taxes, insurance, and HOA to get the maximum principal and interest, then find the loan amount that produces that payment at your rate and term. That number tells you the largest loan the lender will approve — if you need to borrow more, you must increase rent, reduce expenses, or make a larger down payment. DSCR loans typically carry interest rates 0.5–1.5% above conventional mortgages and may require 20–25% down. They are a powerful tool for scaling a portfolio, but the higher cost means the property must cash flow comfortably to make the numbers work.
Worked example
You are buying a rental with $2,200 monthly rent. You need a $180,000 loan at 7.5% interest on a 30-year term. Monthly property tax is $250, insurance is $120, and HOA is $50. The lender requires a DSCR of at least 1.25.
The monthly principal and interest on $180,000 at 7.5% for 30 years is about $1,259. PITIA = $1,259 + $250 + $120 + $50 = $1,679. DSCR = $2,200 / $1,679 = 1.31. That exceeds the 1.25 target, so the loan passes.
The maximum loan that meets the 1.25 target: target PITIA = $2,200 / 1.25 = $1,760. Max P&I = $1,760 − $250 − $120 − $50 = $1,340. Solving for the loan amount that produces a $1,340 payment at 7.5% over 30 years gives about $192,000. So the lender would approve up to roughly $192,000 — if you need more, you must increase rent or put more down.
Frequently asked questions
What is a DSCR loan?
A DSCR loan is investment property financing where the lender qualifies the loan based on the property cash flow, not your personal income. The debt service coverage ratio compares monthly rent to the total housing payment (PITIA). DSCR loans are popular with investors who own multiple properties or have complex tax returns.
What DSCR do lenders require?
Most DSCR lenders require a minimum ratio of 1.20 to 1.25, meaning the rent must exceed the PITIA by 20–25%. A DSCR of 1.0 means rent exactly covers the housing payment. Below 1.0, the property does not generate enough income to qualify. Higher DSCRs may unlock better rates.
What is PITIA?
PITIA stands for Principal, Interest, Taxes, Insurance, and HOA — the total monthly housing payment. The DSCR formula divides monthly rent by PITIA. To improve your DSCR, you can reduce any component of PITIA: lower the loan amount (larger down payment), find a lower rate, or reduce taxes, insurance, or HOA.
How is the maximum loan amount calculated?
The calculator finds the target PITIA by dividing rent by the target DSCR, subtracts taxes, insurance, and HOA to get the maximum principal and interest, then back-solves the amortization formula for the loan amount that produces that payment at your rate and term. That is the largest loan the lender will approve at your target DSCR.
Are DSCR loan rates higher than conventional mortgages?
Yes, typically 0.5–1.5% above conventional rates, because the lender is relying on property cash flow rather than personal income verification. DSCR loans also usually require 20–25% down. The higher cost means the property must cash flow comfortably to justify the financing.