Annual Debt Service

Definition: Annual debt service is the total principal and interest payable on a property’s loans during a year.

Example

A property’s first-loan payment is $1,800 per month and its second-loan payment is $200 per month, both principal and interest only. Annual debt service is ($1,800 + $200) × 12 = $24,000.

Keep the distinction clear

Use principal and interest from all applicable loans. Property taxes and insurance are not debt service, even when the lender collects them with the monthly payment.

Related terms

Principal · Interest · Cash Flow · Net Operating Income (NOI)

Keep studying

Income Approach: NOI, Cap Rate, Property Value, and Cash-on-Cash Return

References: OCC archive: Income-property financial analysis

Pronunciation (US): AN-yoo-uhl DET SER-vis (capitals show stress)

Pronunciation reference: Merriam-Webster