LTV measures how much of the property’s value is borrowed; DSCR measures whether the property’s income can service that debt. Lenders check both — a low LTV with a bad DSCR can still kill a deal.
Side by side
| DSCR | LTV | |
|---|---|---|
| Measures | Leverage (loan vs value) | Income vs debt payments |
| Formula | Loan ÷ Value | NOI ÷ Annual Debt Service |
| Typical minimum for approval | ≤ 75–80% LTV | ≥ 1.20–1.25 DSCR |
| Risk it controls for | Collateral shortfall | Cash-flow shortfall |
Strengths of each
DSCR — strengths
- Directly limits lender’s collateral risk
- Simple, universal metric
LTV — strengths
- Confirms the property can actually pay for itself
- The metric that matters for cash flow, not just collateral
Worked example
A property at 70% LTV looks conservative, but if NOI barely covers the payment (DSCR 1.05), a single vacancy could break it — both numbers are needed for a full risk picture.
FAQ
Which matters more to lenders?
Both are checked; DSCR increasingly dominates for investment-property loans since it reflects the property’s own ability to pay, independent of the borrower’s income.
Can a deal fail on DSCR even with great LTV?
Yes — a cheap purchase (great LTV) with weak rental income can still fail DSCR requirements.