DSCR Loan
A DSCR loan is financing where approval and amount are determined by the property's debt service coverage ratio, measuring whether rental income sufficiently exceeds mortgage payments, typically requiring 1.25x coverage minimum.
| DSCR Calculation | Formula |
| Annual rental income | AED 120,000 |
| Annual operating expenses | AED 35,000 |
| Net operating income | AED 85,000 |
| Annual debt service | AED 68,000 |
| DSCR | 1.25x (85,000 / 68,000) |
| Approval Thresholds | Bank Requirements |
| Minimum DSCR | 1.25x to 1.35x |
| Preferred DSCR | 1.5x or higher |
| Below 1.0x | Negative cash flow, rejection |
| Stress testing | 2-3% rate increase scenarios |
| Loan Sizing Method | Example |
| Property NOI | AED 100,000 |
| Required DSCR | 1.25x |
| Maximum debt service | AED 80,000 (100,000 / 1.25) |
| Interest rate | 5% |
| Maximum loan amount | AED 1,600,000 |
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