What Is Debt Yield?
Debt yield measures property NOI as a percentage of the total loan amount. Unlike DSCR or LTV, debt yield is independent of interest rate and amortization.
Formula: Debt Yield = NOI / Loan Amount x 100
Why Lenders Use It
DSCR can be manipulated by extending amortization. LTV depends on appraisal assumptions. Debt yield cuts through both.
| Debt Yield | Lender View |
|---|---|
| 10%+ | Strong — easy approval |
| 8-10% | Acceptable — standard terms |
| 6-8% | Marginal — higher rate |
| Below 6% | Decline |
Example: Houston Office Building
- NOI: $420,000/year
- Loan: $4,200,000
- Debt Yield: 10.0% — passes
If loan was $5,250,000: Debt Yield drops to 8.0% — borderline.
Debt Yield vs DSCR vs LTV
| Metric | Measures | Rate sensitive? | Appraisal sensitive? |
|---|---|---|---|
| Debt Yield | NOI / Loan | No | No |
| DSCR | NOI / Debt Service | Yes | No |
| LTV | Loan / Value | No | Yes |
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Debt Yield Calculator — instant debt yield with lender tier screening.
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