What Is It?
A ratio that compares a property's yearly net operating income to its yearly debt service - the total principal and interest payments on the loan.
The debt coverage ratio, sometimes also called the debt service coverage ratio, is often used by lenders to determine loan eligibility.
A debt coverage ratio below 1 indicates that there is not enough cash flow to cover the debt service, and may result in a loan denial.
How Is It Calculated?
You can learn more about the Debt Coverage Ratio on our blog.