What is the DSCR Debt Service Coverage Ratio? How is it calculated. And how real estate commercial loans or you refinance proposals are affected by it. Commercial real estate loan providers are always concerned about getting repaid the capital amount along with the interest and their service charges. However, they focus too much on the borrower’s ability to repay the loan within the agreed time. But this is not the only major factor as the financial well being of the borrower is not the only thing which indicates his ability to repay the loan. The strength of the property for which the funds are being borrowed usually becomes a bigger factor while analyzing the ability of the borrower to repay. For this purpose, they need to know the expected return on investment or ROI of the project or the real estate for which the funds are being borrowed. In simple words, the lender will be confident in giving a loan to any applicant for a property which will generate enough revenues to meet the principal amount payments and interest service charges To evaluate the ROI return on investment of the project the loan provider will focus on your DSCR Debt Service Coverage Ratio. Definition of Debt Service Coverage Ratio or DSCR Debt Service Coverage Ratio or DSCR typically refers to the amount of cash flow available to meet the annual interest service charges and the principal payments on debt.
