Debt-service coverage ratio

(redirected from Debt-Service Ratios)

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 ?
This final step in setting up the credit bureau will bring transparency, making sure that borrowers stay within their means, living within proper debt-service ratios.
In addition, the agency expects that its debt-service ratios will remain moderate despite the anticipated debt growth.
Loan-to-value ratios on housing debt are generally quite manageable and debt-service ratios have actually fallen among lower-income households, who traditionally have high debt-service ratios (both in absolute terms and relative to other income groups).
Debt-service ratios for homeowners and renters are distributed differently across loan types.
The terms of trade are expected to be inversely related to changes in the debt-service ratios.
Debt and debt-service ratios continue to rise, making households and the financial sector vulnerable to a housing market correction.