Interest Rate

An interest rate is the annual price of borrowing money, stated as a percent of the loan balance. It is the input that moves DSCR most after rent, because it sets the principal and interest payment, which is the largest part of the ratio's denominator.

On the site example, a $375,000 loan over 30 years costs $2,622 a month at 7.5%. At 8.5% the payment is $2,883 and the ratio falls from 1.20 to 1.11. At 9.5% it is $3,153 and the ratio is about 1.04. Each point of rate takes roughly 0.08 off the ratio at this loan size.

DSCR loans are priced above conventional loans because the lender relies on the property instead of the borrower's income. Within a lender's rate sheet, the rate usually improves with a higher DSCR, a lower LTV, a better credit score and a longer prepayment penalty.

Further reading: Interest Rate on Wikipedia.