About the Debt Yield Calculator
Debt yield is the net operating income of a commercial property divided by the loan amount. It tells a lender what cash-on-cash return it would earn on its money if it had to take the property back on day one, and unlike loan-to-value or DSCR it does not depend on cap rates, interest rates or amortization — which is why commercial and CMBS lenders use it as a floor when sizing loans.
Enter the property’s NOI and the proposed loan to see the debt yield, then set the lender’s minimum (often around 8%–10%, higher for riskier property types) to see the largest loan the income supports and how much headroom remains. Add the property value, interest rate and amortization to see loan-to-value, cap rate, annual debt service and the debt service coverage ratio side by side.
It is built for commercial borrowers, mortgage brokers, analysts and students of CRE finance. Lenders size the loan to the most restrictive of their debt yield, LTV and DSCR limits, so compare all three before relying on a loan amount.
With the default inputs, the debt yield is 11.11%. Change any value above to recalculate instantly.
How to use the debt yield calculator
- 1Enter the property’s annual net operating income.
- 2Enter the loan amount you are requesting.
- 3Set the lender’s minimum debt yield to see the maximum loan.
- 4Add the property value, interest rate and amortization for LTV and DSCR.
- 5Use the sensitivity table to see how debt yield changes with loan size.
Formula and method
Debt yield divides annual net operating income by the total loan amount. Because it uses only NOI and the loan, it is unaffected by the interest rate, amortization period or the cap rate used to value the property, so lenders use it as a stable measure of risk when rates are low or values are inflated.
Rearranging the formula gives the maximum loan the property’s income can support at a lender’s minimum debt yield. The calculator also shows the other two common sizing tests: loan-to-value (loan ÷ property value) and debt service coverage (NOI ÷ annual principal and interest, using a fully amortizing payment). A lender will typically offer the smallest loan that satisfies all of its limits.
- NOI
- Annual net operating income
- Loan
- Total first-mortgage loan amount
- DSCR
- Debt service coverage ratio
- LTV
- Loan-to-value ratio
Worked examples
$500k NOI on a $4.5M loan
$500,000 ÷ $4,500,000 = 11.11% debt yield, above the 10% minimum, which would allow up to $5,000,000. At 6.5% over 25 years, debt service is about $364,612 a year for a 1.37× DSCR, and LTV is 64.3%.
Loan too large for a 9% minimum
A $15 million loan on $1.2 million of NOI is an 8% debt yield — below the 9% floor. The income supports only about $13.33 million, a $1.67 million shortfall, and the 1.03× DSCR would also fail most lenders’ tests.
$850k NOI, $7M loan
Debt yield is $850,000 ÷ $7,000,000 = 12.14%. At a 10% minimum the income could support $8.5 million, while LTV is 63.6% and DSCR 1.43× at 7% over 25 years.
Frequently asked questions
What is debt yield?+
Debt yield is a property’s net operating income divided by the loan amount, expressed as a percentage. It shows the return a lender would earn on its loan from the property’s income if it foreclosed immediately.
What is a good debt yield?+
Many commercial and CMBS lenders look for a minimum debt yield of roughly 8%–10%, with higher minimums for riskier property types such as hotels. The acceptable level varies by lender, market and interest-rate environment.
How is debt yield different from DSCR?+
DSCR divides NOI by annual debt service, so it changes with the interest rate and amortization. Debt yield divides NOI by the loan amount and ignores loan terms, making it a cleaner measure of how much debt the income supports.
How do I calculate the maximum loan from debt yield?+
Divide NOI by the minimum debt yield. With $600,000 of NOI and a 10% minimum, the maximum loan is $600,000 ÷ 0.10 = $6,000,000, before also checking LTV and DSCR limits.
Why did lenders start using debt yield?+
After the 2008 financial crisis, lenders wanted a sizing metric that could not be inflated by low interest rates, long amortization or aggressive cap-rate valuations. Debt yield depends only on income and loan size, so it became a standard CMBS underwriting test.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.