Glossary

Interest cover ratio (ICR)

What ICR measures, how it differs from DSCR, and what ratio lenders typically want to see on an income-producing property.

Interest cover ratio, or ICR, measures a property or business's net income against the interest cost of a facility alone, showing how comfortably income covers the cost of debt before any principal repayment is considered. It is commonly used on commercial property and construction facilities as a quick check of serviceability headroom, with lenders generally wanting to see income cover interest by a meaningful margin rather than a ratio close to one. A low or falling ICR is one of the first signals a lender reads as tightening risk, particularly on a facility with capitalised interest where the ratio needs to hold even as the balance grows. ICR is typically read alongside DSCR, which factors in principal repayments as well, giving a fuller picture of whether the facility as structured is genuinely serviceable rather than merely interest-covered.

Related

Commercial property loans · DSCR · Serviceability

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