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What Is Debt Service Coverage Ratio
By Admin | July 25, 2009
Debt service coverage ratio is a measurement of the ability of a property to generate enough revenue so as to cover the worth of its mortgage payments. It is arrived at by dividing the net operating income. The debt service coverage is used in both corporate and real estate finance and it is used to calculate the amount of cash that is available to meet debt obligations.
DSCR is used by financial institutions to determine whether to make a loan available for a loaner or when determining whether to refinance loans for investment property. When a DSCR is equal or greater than one, means that the debtor is able to service the debt on the income from the investment property that might be awarded to him. When dealing with personal finances banks normally require a DSCR of at least one to advance such a loan.
Topics: Finacial rumblings, Finance | No Comments »