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The debt service coverage ratio (DSCR) measures whether a rental or commercial property's net operating income is sufficient to cover its total annual mortgage debt payments, calculated as net operating income divided by annual debt service.
GDS and TDS qualify a borrower using their personal employment or business income. On a rental, multi-unit, or commercial file, the property's own income is often what's actually supporting the debt, so lenders turn to DSCR — comparing the building's net operating income directly against the mortgage payments it needs to cover.
Most Canadian lenders look for a minimum DSCR somewhere in the 1.10 to 1.25 range depending on the property type and program, meaning the property needs to generate 10% to 25% more income than its debt payments require. CMHC's MLI Select program, for example, factors DSCR alongside other criteria when underwriting insured multi-unit financing.
DSCR = Net operating income ÷ Annual debt service
Not a single national standard: minimum DSCR thresholds are set by individual lender policy, not by a uniform national rule, and commonly range from about 1.10 to 1.25 depending on property type and program.
Used for rental, multi-unit, and commercial files: DSCR is the standard qualifying ratio for investment property and commercial deals where the property's own income drives approval.
Factored into MLI Select underwriting: CMHC's MLI Select program for insured multi-unit financing considers DSCR alongside other metrics like cap rate and loan-to-value.
A personal covenant can still be required: even on a DSCR-qualified deal, a lender may still require a personal guarantee or covenant from the borrower behind the numbers.
A small apartment building is being refinanced:
$132,000 ÷ $110,000 = 1.20, meaning the property generates 20% more income than needed to cover its debt payments.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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