DSCR , debt-service coverage ratio, is annual NOI divided by annual debt service. It measures the cash-flow cushion above the loan payment. Standard agency multifamily minimum is roughly 1.25x; commercial perm is 1.20x to 1.40x depending on asset class, structure, and reserves . Bridge lenders often lead with debt yield and still test DSCR at the interest rate, including the rate-cap strike.
How is debt service calculated?
Annual debt service uses the loan rate (or a stress rate, see below) and the amortization schedule. For interest-only loans, debt service is the rate times the loan amount. For amortizing loans, debt service is the actual constant. For floating-rate loans, lenders typically apply a stress rate above current SOFR.
Why is DSCR less informative than debt yield?
DSCR is rate-dependent. A loan that meets 1.25x at 5% may only meet 1.05x at 7%. Debt yield strips out rate dependence and measures pure cash-flow cushion. Sophisticated underwriters look at both; sizing is constrained by the binding test.
Sources
- Multifamily Market Commentary · Fannie Mae Economic & Strategic Research · 2026-Q1
- Multifamily Research and Outlook · Freddie Mac Multifamily · 2026-Q1
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1