Does a HELOC replace my mortgage?

No — that's the main difference from a cash-out refinance. A HELOC sits behind your existing mortgage as a second lien, so your original loan stays exactly as it is.

Can I borrow again after paying down a HELOC?

Yes, during the draw period — that revolving flexibility is the defining feature. After the draw period ends, the line enters repayment and you pay the balance down.

HELOC or cash-out refinance — which is better?

It depends on your current mortgage, how much you need, and whether the need is ongoing. If you want to keep your mortgage and value flexibility, a HELOC often fits; for a single lump sum, a cash-out refinance may be better.

How to Calculate DSCR | MortgageQuote.com

The DSCR formula

The debt-service coverage ratio is calculated by dividing a property’s income by its debt obligations. In its most common form for rental property financing: DSCR = rental income ÷ debt payments, where debt payments typically include principal, interest, taxes, insurance, and any HOA or association dues (often abbreviated PITIA). The result is a ratio: if a property brings in $2,400 a month and its total debt payment is $2,000, the DSCR is 1.2.

What counts as income

For DSCR purposes, the income is generally the property’s rental income — either the actual rent (for a property already leased) or the market rent as determined by an appraisal or rent schedule (for a new purchase). Lenders have their own rules about which figure they use and how they document it. The point is that this is the property’s income, not your personal income, which is what makes DSCR loans distinctive.

What counts as debt

The debt side of the ratio is the property’s total housing payment: principal and interest on the mortgage, property taxes, insurance, and any HOA or condo dues. Getting an accurate picture of these costs matters, since underestimating them inflates the ratio. Our DSCR calculator can help you estimate the ratio for a property using figures you provide.

What ratio lenders want

Lenders generally look for a DSCR at or above a certain threshold, meaning the property’s income covers — or more than covers — its debt. A higher ratio indicates stronger cash flow and is viewed more favorably; a ratio below the threshold may still be financeable under some programs but can affect terms. The exact requirement varies by lender and program. As a Florida broker (NMLS #1967971), we can help you understand how a specific property’s ratio would be viewed.

This article is for general educational purposes and is not financial, legal, or tax advice, nor a commitment to lend or an offer of any specific rate or term. Consult a licensed professional about your situation. MortgageQuote.com · NMLS #1967971. Equal Housing Opportunity.

Frequently asked questions

How do you calculate DSCR?

Divide the property’s rental income by its total debt payments (principal, interest, taxes, insurance, and any HOA dues). For example, $2,400 income ÷ $2,000 debt = a DSCR of 1.2.

What is included in the debt for DSCR?

Typically the property’s full housing payment: principal, interest, property taxes, insurance, and any HOA or condo dues (often abbreviated PITIA).

What income is used for DSCR?

The property’s rental income — either actual rent for a leased property or market rent from an appraisal or rent schedule for a new purchase. Not your personal income.

What DSCR do lenders want to see?

Generally a ratio at or above a certain threshold, meaning the income covers the debt. A higher ratio is viewed more favorably. The exact requirement varies by lender and program.

How do I calculate DSCR?

Divide the property’s income by its debt obligation — income above the payment gives a ratio over 1.0. Our DSCR calculator does this instantly, and a broker can explain how lenders use the result.

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