Debt Service Coverage Ratio (DSCR)
Also known as: DSCR · Debt coverage ratio · Income coverage ratio · Rental coverage ratio
An investor-side mortgage underwriting ratio measuring net operating income against annual debt service — DSCR ≥ 1.10–1.20 is a common lender-policy threshold for rental-property and small-commercial financing in BC.
Debt Service Coverage Ratio (DSCR) is a rental-property and small-commercial underwriting metric defined as Net Operating Income (NOI) divided by annual debt service (principal + interest). A DSCR of 1.00 means NOI exactly covers debt payments; a DSCR of 1.20 means NOI is 20% above debt service. BC lenders financing 1–4-unit rental properties typically require DSCR ≥ 1.10–1.20 at the qualifying rate; commercial-class (5+ unit) mortgages start around 1.25 and rise with deal complexity. DSCR is paired with — not a replacement for — the borrower's personal GDS/TDS test on residential rental purchases.
DSCR is a lender-policy ratio, not a regulatory threshold. It is not codified in OSFI Guideline B-20 or CMHC underwriting rules; each lender sets its own DSCR floor and rental-income inclusion rate (typically 50–80% of gross rents recognized after vacancy and operating-expense haircuts). The practitioner reality investors miss: lenders compute DSCR at the stress-test qualifying rate, not the contract rate, which can push a deal that "cash-flows on paper" into DSCR rejection. Always model DSCR at qualifying-rate before writing offers on income property.
Related terms
- Net Operating Income (NOI) — An investor-side income measure: gross rental income less vacancy allowance and operating expenses (property tax, insurance, maintenance, management, utilities) — but BEFORE mortgage interest, depreciation, and capital expenditures.
- Capitalization Rate (Cap Rate) — An investor-side property valuation metric defined as Net Operating Income divided by purchase price (or current market value) — the unlevered annual yield a buyer earns on rental property before financing.
- OSFI Mortgage Stress Test (B-20) — OSFI Guideline B-20 requires federally-regulated lenders to qualify mortgage borrowers at the greater of (a) the contract rate plus 2 percentage points or (b) the Bank of Canada qualifying rate (5.
See also
Use any of these formats. Codex content is licensed under CC BY 4.0 — attribution required.
@misc{bronsonjob-osfi_b20_stress_test,
author = {Job, Bronson},
title = {{OSFI Guideline B-20 mortgage stress test}},
howpublished = {BC Real Estate Codex},
year = {2026},
url = {https://www.bronsonjob.com/codex#osfi.b20.stress_test},
urldate = {2026-05-08},
note = {Fact ID: osfi.b20.stress_test, version 1.}
}Job, B. (2026). OSFI Guideline B-20 mortgage stress test. *BC Real Estate Codex*. Retrieved 2026-05-08, from https://www.bronsonjob.com/codex#osfi.b20.stress_test
OSFI Guideline B-20 mortgage stress test — Bronson Job, BC Real Estate Codex (2026-05-08). https://www.bronsonjob.com/codex#osfi.b20.stress_test
Fact id: osfi.b20.stress_test · v1 · machine-readable: /api/v1/facts/by-id/osfi.b20.stress_test.json
Verified sources (1)Click to expand
Every claim on this page is sourced to a primary government, regulator, or industry-association URL. We re-verify quarterly; the verification dates below show when each source was last confirmed against the live government page.
- OSFIretrieved 2026-05-08Guideline B-20: Residential Mortgage Underwriting Practices and Procedureshttps://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b20.aspx
osfi.b20.stress_test · v1View in Codex →