Finance
What is the 'debt service coverage ratio' (DSCR) used for in Illinois commercial real estate lending?
ATo calculate the borrower's personal income tax liability
BTo measure whether a property's net operating income is sufficient to cover its debt payments; typically lenders require a DSCR of at least 1.20-1.25✓ Correct
CTo determine the maximum allowable commercial property tax rate
DTo measure the ratio of equity to total property value
Explanation
The Debt Service Coverage Ratio (DSCR) = Net Operating Income ÷ Annual Debt Service (mortgage payments). For example, if NOI is $120,000 and annual mortgage payments are $100,000, DSCR = 1.
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