How DSCR is worked out
Net operating income is the annual rent less running costs. DSCR is that income divided by a year's loan payments, repayment or interest only. A DSCR above 1 means the income covers the payments.
Most commercial and business-purpose property loans fall outside the consumer credit rules, so the calculator charges one twelfth of the quoted yearly rate each month, as many commercial lenders do. Smaller business loans to sole traders and small partnerships can still be regulated.
Worked example
A property earns £60,000 a year with £12,000 of costs, so its net operating income is £48,000. A £500,000 loan at 7% over 20 years costs £46,517.94 a year: a DSCR of 1.03. At a 1.25 minimum, the largest loan would be £412,744.02.
On interest only the payments drop to £35,000 a year, the DSCR rises to 1.37 and the largest loan to £548,571.43.
DSCR or interest cover?
UK buy-to-let lenders mostly use an interest cover ratio (ICR) instead: gross rent against interest at a stressed rate, often needing 125% or 145%. Commercial lenders and business loans use DSCR.
For a buy-to-let mortgage, use the buy-to-let rental cover calculator .
What this calculator assumes
Steady rent and costs, a fixed rate and monthly payments. Lenders may also stress the rate or deduct a void allowance.
Borrowing in the US?
The country choices above the inputs open separate local pages. US DSCR investor loans compare monthly rent with the full PITIA payment, including property tax, insurance and HOA dues. Choosing United States opens that page and resets the inputs; amounts are not converted.
For the US version, use the US DSCR loan calculator in US dollars.
Inputs for the UK DSCR loan calculator
Annual rental income
The rent the property brings in over a year, in pounds.
Annual running costs
Management, maintenance, insurance, service charges and voids.
Loan amount
How much you want to borrow.
Interest rate
The yearly rate on the offer, charged monthly at one twelfth.
Term
How long the loan runs, in years.
Repayment type
Repayment or interest only.
Lender's minimum DSCR
The lowest ratio the lender accepts, often around 1.25.
CALCULATOR QUESTIONS
UK DSCR loan calculator questions
How do you calculate DSCR?
Divide net operating income by a year's loan payments. £48,000 of income against £46,517.94 of payments is a DSCR of 1.03.
What DSCR do UK lenders want?
Commercial lenders often look for 1.25 or more, but criteria vary by lender and property type.
Does interest only improve DSCR?
Yes, because the yearly payments are lower, but you still owe the full loan at the end.
Is DSCR the same as ICR?
No. ICR compares gross rent with interest only, usually at a stress rate. DSCR uses net income and the actual payments.