Investing With Debt Service Coverage Ratio Loans

DSCR Loans

A DSCR (Debt Service Coverage Ratio) loan is a type of financing option for qualified real estate investors typically used in longer term loans for rental properties. The terms of the loans are correlated with the property's cash flow rather than just the borrower's personal income. The key metric for this loan type is derived by dividing the property's annual NOI (net operating income) by its annual mortgage debt service (principal & interest payments). This ratio is used to measure the property's ability to cover its debt obligations.

Key Characteristics:

• DSCR is calculated by dividing annual NOI by annual mortgage debt service. A higher DSCR indicates a stronger ability to cover debt. 

• Lenders evaluate the property's rental income generating ability to cover debt obligations.

Benefits for Investors:

• Can allow financing of multiple properties.

• The process is often faster and requires less paperwork compared to other loan options.

• Suitable for those with traditional and non-traditional income (self-employed).

Considerations:

• May have higher interest rates than other loan types.

• Some loans may include prepayment penalties. 

• A larger down payment may be required to mitigate risk for the lender.

Are DSCR loans Available for Refinancing and Purchasing a New Property?

DSCR loans are designed for qualified investors seeking to refinance current properties as well as acquire new properties, providing flexibility in real estate financing.

To learn more about our current products and rates:

Call 513-761-6688

Email one of our loan consultants remo@springvalleybank.com; jmiller@springvalleybank.com

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The content of this page is not intended as investment advice