What this calculator does
Debt yield measures a property's net operating income against the loan amount, rather than against the property's price or value. It became popular with commercial lenders after the late-2000s downturn because, unlike loan-to-value or debt service coverage, it does not depend on a capitalisation rate assumption or an amortisation schedule that can be adjusted to make a loan look safer than it is.
Because debt yield ignores interest rate and loan term entirely, it gives a lender a clean read on how much income would be left if they had to take the loan back and sell the property to recover the loan amount, using only the property's actual income.
The formula
Divide the property's net operating income by the loan amount and express the result as a percentage.
| Term | Meaning |
|---|---|
| Debt yield | Net operating income as a percentage of the loan amount: (NOI ÷ loan amount) × 100. |
| Net operating income (NOI) | Rental income after operating expenses, before debt service, taxes on income, and capital expenditure. |
| Loan amount | The total amount being borrowed against the property. |
The inputs explained
| Field | What to enter |
|---|---|
| Net operating income (annual) ($) | The property's annual net operating income, after operating expenses but before any debt payments. |
| Loan amount ($) | The loan amount being sized against that income. |
When to use it
Sizing a commercial loan
Lenders often set a minimum debt yield, commonly somewhere in the 8-10% range depending on the lender and property type, as a floor that loan-to-value and DSCR calculations must also clear.
Comparing loan requests across properties
Debt yield strips out interest rate and amortisation, so it isolates whether the income itself, relative to the loan size, is strong enough, independent of how favourable the loan terms happen to be.
Stress-testing a loan against rising rates
Because debt yield does not depend on the interest rate, it stays a useful check even in an environment where rate changes are making debt service coverage harder to compare across loans written at different times.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How debt yield changes with loan amount at a fixed NOI
A fixed $96,000 NOI, against a range of loan amounts.
| Loan amount | Debt yield | Assessment |
|---|---|---|
| $800,000 | 12.0% | Comfortably above the 10% level many lenders treat as a minimum |
| $960,000 | 10.0% | Comfortably above the 10% level many lenders treat as a minimum |
| $1,067,000 | 9.00% | Around the level some lenders treat as a minimum, worth checking their specific policy |
| $1,200,000 | 8.00% | Around the level some lenders treat as a minimum, worth checking their specific policy |
| $1,371,000 | 7.00% | Below the 8-10% range commonly used as a lender minimum |
| $1,600,000 | 6.00% | Below the 8-10% range commonly used as a lender minimum |
How debt yield changes with NOI at a fixed loan amount
A fixed $1,200,000 loan, against a range of NOI levels.
| Net operating income | Debt yield | Assessment |
|---|---|---|
| $72,000 | 6.00% | Below the 8-10% range commonly used as a lender minimum |
| $96,000 | 8.00% | Around the level some lenders treat as a minimum, worth checking their specific policy |
| $108,000 | 9.00% | Around the level some lenders treat as a minimum, worth checking their specific policy |
| $120,000 | 10.0% | Comfortably above the 10% level many lenders treat as a minimum |
| $144,000 | 12.0% | Comfortably above the 10% level many lenders treat as a minimum |
| $168,000 | 14.0% | Comfortably above the 10% level many lenders treat as a minimum |
Questions
What debt yield do lenders usually require?
It varies by lender and property type, but figures in the 8-10% range are commonly cited as a floor for commercial mortgage loans; some lenders set a higher minimum for riskier property types.
How is debt yield different from cap rate?
Cap rate divides NOI by the property's value or price; debt yield divides the same NOI by the loan amount instead. Two properties can share a cap rate but have very different debt yields if they are financed at different loan sizes.
How is debt yield different from DSCR?
DSCR compares NOI to the actual debt payments, which depend on interest rate and amortisation. Debt yield compares NOI to the loan amount itself, ignoring rate and term entirely, which is why lenders use it as a second, independent check.
Why do lenders like debt yield so much?
It cannot be improved by extending the amortisation period or negotiating a lower rate, the way DSCR can. That makes it harder for a borrower or broker to structure a loan to look safer than the underlying property income actually supports.
For the loan-size side of the same underwriting picture, see the loan-to-value calculator. For a cap-rate view of the same income, see the Finance category's cap rate calculator.