Glossary definition
DSCR (Debt Service Coverage Ratio)
A financial metric that measures the ability of a property's net operating income to cover its annual debt service obligations, calculated as net operating income divided by total debt service. Lenders typically require a minimum DSCR of 1.20x to 1.50x for commercial mortgages and investment properties.
Definition
A financial metric that measures the ability of a property's net operating income to cover its annual debt service obligations, calculated as net operating income divided by total debt service. Lenders typically require a minimum DSCR of 1.20x to 1.50x for commercial mortgages and investment properties. A DSCR below 1.0x means the property does not generate enough income to service the debt.
See also
Closely related terms.
ICR (Interest Cover Ratio)
A measure of how comfortably a property's rental income covers the interest payments on a loan, calculated as annual rental income divided by annual interest costs.
Net Yield
The annual rental income from a property expressed as a percentage of its purchase price or market value, after deducting all operating expenses such as management fees, maintenance, insurance, and void periods.
Gross Yield
The annual rental income from a property expressed as a percentage of its purchase price or market value, before deducting any expenses.
Commercial Mortgage
A long-term loan secured against commercial, semi-commercial, or mixed-use property, used to fund acquisition, refinancing, or capital raising.
Further reading
Guides that touch this term.
Guide
Commercial Mortgages in the UK: A Complete Guide
Everything you need to know about commercial mortgages in the UK - from eligibility criteria and rental coverage ratios to how lenders value multi-let properties and what lease length matters.
4 min read readReadGuide
RICS Red Book Valuations for Development: What Lenders Require
A comprehensive guide to RICS Red Book valuations in development finance, covering what lenders require, how valuations are structured, and how to ensure your scheme is accurately assessed.
11 min read readReadGuide
Development Finance Application Checklist: Documents You Need
A comprehensive checklist covering every document lenders require for a development finance application, from development appraisals to contractor tenders and planning evidence.
11 min read readRead
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