1. What is a Net Servicing Ratio Calculator?

Definition: This calculator determines the net servicing ratio (NSR) which measures a property's ability to cover its debt obligations.

Purpose: It helps lenders and borrowers assess mortgage affordability and financial risk.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( NSR \) — Net Servicing Ratio (dimensionless)
• \( NOI \) — Net Operating Income (USD)
• \( DS \) — Debt Service (USD)

Explanation: The ratio compares the property's income to its debt payments, indicating how many times the income covers the debt.

3. Importance of Net Servicing Ratio

Details: Lenders typically require NSR ≥ 1.0, meaning income fully covers debt. Higher ratios indicate better financial health.

4. Using the Calculator

Tips: Enter the property's annual net operating income and total annual debt service. All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What's a good NSR value?
A: Typically 1.0-1.25 is acceptable, with higher values preferred. Below 1.0 indicates insufficient income to cover debt.

Q2: How is NOI different from gross income?
A: NOI is gross income minus operating expenses (excluding debt service).

Q3: What's included in debt service?
A: All mortgage payments (principal + interest) plus any other required debt payments.

Q4: How often should NSR be calculated?
A: Annually for existing properties, and always before new financing.

Q5: Can NSR be too high?
A: Extremely high NSR (>2.0) might suggest underutilized property potential.