Debt-service coverage ratio

(redirected from Debt-Service Ratio)

Debt-service coverage ratio

Earnings before interest and income taxes, divided by interest expense plus the quantity of principal repayments divided by one minus the tax rate.

Debt-Service Coverage Ratio

1. In investment real estate, the ratio of annual net operating income on a piece of investment property to its annual debt service. Banks use the DSCR to help determine whether to make or refinance loans for investment property. A DSCR equal to or greater than 1 indicates that the debtor is able to service the debt on the income from the investment property. In personal finance, banks usually require a DSCR of at least 1 to make such a loan, while they generally expect a ratio of 1.2 for commercial projects.

2. In government finance, the ratio of annual export earnings to its annual debt service on external debt.
References in periodicals archive ?
Researchers at BIS said that Australia's debt-service ratio, household debt service ratio and cross-border claims, indicate that the nation's banking sector could come under stress in the near future.
What is interesting about this question is the fact that Canadian monthly mortgage bills, measured by the mortgage debt-service ratio, are approximately the same in size as they have been historically.
President Moon pledged during his campaign to bring the debt down to below 150 percent of disposable income by expanding the credit evaluation metric system of debt-service ratio (DSR) and creating jobs.
According to the bank's complaint, the borrowers triggered a default by failing to maintain the debt-service ratio, failing to timely complete construction, ceasing construction and more.
The report finds that the debt-service ratio in the Canadian mortgage market - the cost of carrying a mortgage as a share of disposable income - at the aggregate level is 7.
Two common indicators of mortgage repayment risk are the loan-to-value ratio (the size of the loan relative to the value of housing collateral) and the debt-service ratio (the size of mortgage repayments relative to household income).
On the other hand, the debt-service ratio is significantly less likely to be related to a company's current credit rating.
The state's debt-service ratio, which Davis reduced from 4 percent to 3 percent, will have more than doubled -- and by the following year nearly tripled.
In the United States, the United Kingdom, France and Italy, the debt-service ratio has recently started to rise slightly while in Spain, this ratio has been increasing continuously over the past decade.
However, the household debt-service ratio (the ratio of required payments on outstanding mortgage and consumer debt to disposable income) has moderated over the past couple of years but remains high compared to levels over the past 24 years.
But Thailand's debt-service ratio -- annual interest and principal payments as a percentage of export earnings -- rose to 19.
The purpose of this paper is to determine whether the debt-service ratio is of independent help in predicting future spending growth and, if so, to interpret why this might occur.