Debt Yield Calculator
Calculate Debt Yield to assess lender risk. Debt Yield = NOI ÷ Loan Amount. Most lenders require 9%+ debt yield.
Typical lender requirement is 9-10%
What is Debt Yield?
Debt Yield is a risk metric that shows what return a lender would receive on their loan if they had to foreclose. It's independent of interest rates and loan terms.
Why Lenders Use Debt Yield:
- Rate-Independent: Unlike DSCR, debt yield doesn't change with interest rate fluctuations
- Conservative: Provides a floor for loan sizing even in low-rate environments
- Quick Assessment: Fast way to gauge maximum loan proceeds
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Frequently Asked Questions
Why do lenders use Debt Yield instead of DSCR?
DSCR can be manipulated by interest-only periods or extended amortization. Debt Yield is a pure measure of risk relative to the loan amount, independent of loan terms.
What is a minimum acceptable Debt Yield?
CMBS and Life Co lenders typically look for 9-10% minimum. Transitional bridge lenders might accept 7-8%.
How does interest rate affect Debt Yield?
It doesnt. That is the point. Debt Yield focuses purely on the relationship between Net Operating Income and the Loan Amount.
Can I get a loan with a 7% Debt Yield?
Yes, typically from a Bridge lender or Debt Fund who focuses on the "After Repair" potential, rather than a conservative bank.
Is Debt Yield used for multifamily?
Yes, especially for loans securitized in the CMBS market or held by large institutional lenders. Local banks focus more on DSCR and LTV.