Here’s a problem many investors hit: traditional mortgage qualification maxes out. Your debt ratios are full. Your personal income can’t support more loans. But you have properties that cash flow beautifully.
DSCR lending solves this. Instead of qualifying based on your personal income, you qualify based on the property’s income. If the property’s rent covers the mortgage (plus a margin), you can get the loan.
This is how serious investors scale beyond what traditional lending allows.
Ready to explore DSCR financing for your investment property? Our team specializes in property-based lending that helps you qualify based on cash flow, not just personal income.
Traditional vs. Property-Based Lending
| Lending Type | What Matters | Who It Helps |
|---|---|---|
| Traditional | Your personal income and debt ratios | W-2 employees, first-time investors |
| DSCR | Property cash flow | Scaled investors, self-employed |
| Hybrid | Both factors | Various situations |
Run your numbers through our DSCR Loan Calculator to see if your property qualifies.
The Traditional Limitation
Traditional lenders care about your personal income, existing debts, and often how many properties you already own. Eventually, those ratios hit limits—no matter how well your properties perform.
Self-employed investors face particular challenges. Complex income situations may not satisfy conventional underwriting despite genuine ability to service debt.
The DSCR Solution
DSCR lending evaluates whether the specific property generates enough income to cover its debt service. If the rental income covers the mortgage payment plus a margin, you may qualify regardless of your personal financial picture.
This is how you keep acquiring properties when personal income limits would otherwise stop you.
Not sure if DSCR lending is right for your portfolio? Let’s review your specific situation and map out the best financing strategy for your next acquisition.
How DSCR Works
The Calculation
DSCR = Net Operating Income ÷ Debt Service
- DSCR of 1.0: Income exactly covers debt payments
- DSCR above 1.0: Income exceeds debt payments (this is what you want)
Example: Property generates $60,000 annual net operating income. Annual debt service is $48,000. DSCR = 1.25—income exceeds debt by 25%.
What Lenders Require
Most DSCR lenders want minimum ratios of 1.20 to 1.25. Some accept lower ratios with compensating factors; others demand higher coverage.
Higher requirements = greater lender security but fewer qualifying properties Lower requirements = more deals possible but potentially higher rates
Canadian Context
In Canada, lenders typically use Debt Coverage Ratio (DCR) or similar metrics. Terminology varies, but the concept is the same: qualifying based on property income rather than personal income.
Research specific Canadian lender requirements for property-based financing.
Why This Matters for Investors
Bypass Personal Income Limits
If your personal debt ratios are maxed but your properties cash flow, DSCR programs let you keep acquiring. Portfolio growth becomes limited by finding qualifying properties—not by your paycheck.
Simplified Documentation
DSCR loans often require less personal income documentation. Bank statements, tax returns, detailed employment verification may be reduced or eliminated when property cash flow drives qualification.
Faster approvals. Less paperwork hassle.
Self-Employed Advantage
If you’re self-employed with complex income that traditional lenders struggle to verify, DSCR lending evaluates asset performance instead. The property’s numbers matter; your tax return complexity doesn’t.
Portfolio Scaling
Investors building serious portfolios eventually need property-based lending. Traditional limits constrain everyone eventually. DSCR is how you break through.
The Requirements
Property-based lending still has requirements—they’re just focused differently.
Property Performance
The property must demonstrate adequate income relative to proposed debt. Lenders verify rental income through:
- Existing leases
- Rent rolls
- Market rent analyses
Not all properties qualify. Weak cash flow properties may not meet minimum coverage requirements.
Down Payment
DSCR loans typically require substantial down payments—often 25-30% or more. Higher equity compensates for reduced personal income verification.
Plan for bigger equity requirements than conventional financing.
Credit Still Matters
Personal income is less important, but credit history matters. Lenders want evidence of responsible financial management. Minimum credit scores typically apply.
Strong credit = better terms.
Property Characteristics
DSCR lenders prefer:
- Established rental income
- Good condition
- Stable tenancies
- Straightforward property types
Properties needing significant work or with unusual features may face challenges.
Interest Rate Reality
Expect Higher Rates
DSCR loans often carry rates above conventional mortgages. The premium compensates lenders for different risk profiles.
Is that premium worth it? That depends on whether you can access financing any other way. For many scaled investors, the answer is clearly yes.
Shop Around
DSCR rates vary significantly among lenders. Shopping multiple lenders often reveals meaningful differences.
Term Options
Available terms may differ from traditional mortgages. Understand what’s available and factor terms into your investment analysis.
Working with DSCR Lenders
Finding Programs
DSCR programs are offered by:
- Some banks
- Credit unions
- Alternative/private lenders
Mortgage brokers specializing in investment properties often have access to multiple DSCR programs. They can match your situation to appropriate lenders.
Application Preparation
Strong applications include:
- Clear property income documentation
- Rent rolls and lease agreements
- Expense documentation supporting your numbers
Present properties professionally to get favorable treatment.
Build Relationships
Relationships with property-based lenders improve access over time. Repeat borrowers with good payment history often get better terms.
Our network includes multiple DSCR lenders with different program criteria. Let us match your property and situation to the right lender with the best terms available.
Frequently Asked Questions
What DSCR do lenders require?
Can I use projected rent for qualification?
What about portfolios with multiple properties?
Are DSCR loans available for commercial properties?
What if income declines after closing?
How does DSCR lending benefit self-employed real estate investors?
What down payment is typically required for DSCR loans?
The Bottom Line
DSCR lending transforms your investment capacity. When personal income limits would otherwise stop portfolio growth, property-based financing lets you keep acquiring.
The trade-offs: higher down payments, potentially higher rates, credit still matters.
The payoff: continued portfolio expansion based on what your properties actually do, not what your tax return says.
For serious investors scaling their portfolios, understanding DSCR options isn’t optional—it’s essential.
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.
Written by
LendCity
Published
February 15, 2026
Reading Time
5 min read
Down Payment
The upfront cash payment when purchasing a property. For 1-4 unit investment properties, minimum 20% down is required. 5+ unit multifamily can use CMHC MLI Select with lower down payments, and house hackers can put as little as 5% down on owner-occupied 2-4 plexes.
DSCR
Debt Service Coverage Ratio - a metric that compares a property's net operating income to its mortgage payments. A DSCR of 1.25 means the property generates 25% more income than needed to cover the debt. Lenders typically require a minimum DSCR of 1.0 to 1.25 for investment property loans.
Coverage Ratio
A measure of a property's ability to cover its debt payments, typically referring to DSCR. Commercial lenders often require a minimum of 1.2, meaning the property's net operating income exceeds debt payments by at least 20%.
NOI
Net Operating Income - the total income a property generates minus all operating expenses, but before mortgage payments and income taxes. Calculated as gross rental income minus vacancies, property taxes, insurance, maintenance, and property management fees.
Conventional Mortgage
A mortgage with 20% or more down payment, not requiring default insurance. This is the standard financing type for investment properties in Canada, as high-ratio (insured) mortgages aren't available for pure rentals.
Commercial Lending
Financing for commercial real estate or business purposes, typically qualified based on property income (NOI) rather than personal income. Includes mortgages for multifamily buildings (5+ units), retail, office, and industrial properties.
Cash Flow
The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.
Equity
The difference between a property's current market value and the remaining mortgage balance. If your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. Equity builds through mortgage payments, appreciation, and property improvements.
Interest Rate
The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed.
Underwriting
The process lenders use to evaluate the risk of a mortgage application, including reviewing credit, income, assets, and property value to determine loan approval.
Market Rent
The rental rate that a property could reasonably command in the current market based on comparable properties, location, and condition. Understanding market rent is essential to maximize income while maintaining competitive positioning and minimizing vacancy.
Rental Income
Revenue generated from tenants paying rent on an investment property. Gross rental income is the total collected before expenses, while net rental income subtracts operating costs to show actual profitability.
Hover over terms to see definitions, or visit our glossary for the full list.