In real estate, I’ve come across questions where it was assumed you knew that debt service = interest expense, and other times when debt service is different from interest expense. What is debt service?
we had this question a few days ago - according to investopedia, debt service = mortgage payment - so both interest and principal.
Yes, debt service is the total dollar cost to “service” your debt, which comprises both interest and principal payments. For the real estate problems, the trick is to remember that only the interest payments are tax deductible, not the principal payments.
I used to be in fixed income (before I got canned). Yes - DS is both P&I.
I’m in fixed income (kind of) and patiently waiting for my canning. Could use a year off to play some golf.
careful what you wish for. it’s tough to pay for golf (even on public courses)
I play for free at my club (greens fees; obviously I pay quarterly dues).
so it is said that the higher the debt-to-service-ratio, the better it is from the perspective of the lender and the MBS investor. the ratio is= net operating income / debt service so the lower the debt service, the higher is the ratio. so why should a low debt service be good? or is the higer the better referred to that NOI is high?
for that ratio, high is good. that means you are generating enough to cover your debt payments.
Coverage ratios = higher is better (for all involved) Leverage ratios = lower is better (for all involved) Simple as that.