Debt service refers to the amount of money required to make mortgage payments on a property, including principal and interest.
When a property owner decides to participate in a 1031 exchange, they may choose to use some or all of the proceeds from the sale of their property to acquire a replacement property. If they choose to finance the replacement property with a mortgage, the debt service on that mortgage is an important factor to consider.
The debt service is typically calculated on a monthly basis and is based on the outstanding principal balance of the mortgage, as well as the interest rate and loan term. Property owners should carefully consider the debt service of any potential replacement property to ensure that it is manageable and fits within their overall investment strategy.
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