Debt Service

Debt Service in real estate refers to the total amount of money required to cover the repayment of interest and principal on a loan or mortgage for a property. This includes regular scheduled payments made over a specified period to fully amortize the loan. Debt service is a crucial component of a property’s financial analysis, as it affects cash flow and the overall profitability of the investment. Lenders and investors closely examine debt service to ensure the property’s income can adequately cover these obligations, often using metrics like the Debt Service Coverage Ratio (DSCR) to assess risk. Properly managing debt service is essential for maintaining financial stability and avoiding default on the loan.