How the reading works
What the ratio is
The debt service coverage ratio, DSCR for short, compares two monthly figures for a rental property: the rent it brings in and the cost of carrying it. Divide the rent by the housing cost and you have the ratio. If the rent is 110 for every 100 of monthly housing cost, the ratio is 1.10.
When the rent and the cost are equal, the ratio is 1.00: the rent covers the cost exactly, with nothing left over. Above 1.00, the rent you entered is larger than the cost you entered; below it, smaller. That is all the number says. It is a comparison, not a grade, and this calculator never calls a ratio good, weak, passing or failing.
What goes into the housing cost
The housing cost is what it takes to carry the property each month: principal and interest on the loan, property taxes, insurance (with flood cover where the property needs it) and any homeowners or condominium association dues. Lenders often shorten the list to PITIA.
You can build the figure here from a loan amount, an interest rate you choose to test and a repayment period, with taxes, insurance and dues added on top. If you already know the monthly figure, choose the quick entry and type it. Either way, the calculator works only with what you enter. Mbanc does not quote rates here, so no rate is filled in for you: type the one you want to test, and change it to see how the ratio moves.
How the rent is evidenced
On the IL Loan the rent comes from a signed lease or an appraiser's market-rent analysis. Enter the monthly figure you expect one of them to show. Which of the two is used for your file, and how the figure is read, follows the investor guideline; Mayer tells you on the first call.
The calculator does not estimate rent or check the figure you type. If you are unsure of the rent, try a lower and a higher figure and see how far the ratio moves.
Short-term rentals
A short-term rental can be financed on the IL Loan when the rent used for DSCR is supportable: a lease or a market rent analysis the program accepts. It is not a separate product; it is an IL file with a sharper rent story.
If you choose short-term rental above, enter the average monthly rental income you expect. How short-term rental income is counted follows the investor guideline, and it is often less than gross bookings, so a cautious figure gives a more useful reading.
Interest-only and the ratio
If part of the loan is interest-only, the payment during those years covers interest alone, so the housing cost is lower and the ratio higher. Once principal begins to be repaid, over the years that remain, the payment rises and the ratio falls.
With interest-only switched on, the calculator shows both ratios side by side and at the same size: one on the interest-only payment, and one once principal is repaid. Which of the two the investor guideline reads is set for each file, and Mayer tells you on the first call.
Reading the bars
The bars draw the same arithmetic. The rent is one brass bar; the housing cost is a stacked bar of its parts; a fine rule marks where the rent ends. A cost bar that stops short of the rule is covered by the rent, and one that runs past it is not.
What this calculator does not do
It does not say whether a loan can be made, how much you could borrow, what rate you would pay or what ratio a loan needs. It does not value the property, estimate the rent or check anything you type. It shows no loan-to-value, no reserves and no verdict: those come from underwriting, from your complete file, in writing, before anything is signed.
Your figures stay on this page. Nothing you type is sent to Mbanc, saved in your browser or added to the page address. Print the reading if you want to keep it.
The IL Loan
The IL Loan is Mbanc's jumbo DSCR loan for investment property: from $1,000,000 up to $3,000,000 on every transaction, and up to $3,500,000 on an investment purchase with a credit score of 700 or above. It is qualified on the property's own rent, with no personal income documentation and no tax returns, in 46 states and the District of Columbia. Investment files routinely close in an LLC.
For a home you live in, the Founder, Operator or AR Loan may fit. Read the guide to the IL Loan.
