Globalbiz CRE Academy
Core Underwriting Ratios

Debt Yield

The lender's honest safety number.

Debt Yield equals a property's NOI divided by the loan amount, expressed as a percentage. Unlike DSCR or LTV, it ignores interest rate and amortization entirely, which is why many lenders treat it as the purest safety check.

The lender's safety number

Debt Yield answers: if the lender had to take the building back, what return would they get on the loan amount itself? Lenders usually want at least 8% to 10%. Debt yield is special because it ignores interest rates and payment schedules entirely — it is pure and honest, and can't be gamed by stretching amortization.

Debt Yield

Debt Yield = NOI ÷ Loan Amount × 100

NOI
— Net Operating Income (annual)
Loan Amount
— The requested or funded loan balance

Worked example: NOI of $100,000 and a $1,000,000 loan: Debt Yield = $100,000 ÷ $1,000,000 = 10%.

Try it: see how Debt Yield constrains loan size

Raise or lower the minimum debt yield requirement and watch which constraint binds.

Loan Sizer — DSCR / LTV / Debt Yield

Generalizes the classic Deal Checker: size the maximum loan under every constraint, then test a specific requested loan amount against each one.

$360,000
$
$4,000,000
$
6.5%
25 yrs
75%
1.25
9%

Maximum Loan (binding constraint wins)

$3,000,000

Binding constraint: LTV

By LTV$3,000,000
By DSCR$3,554,465
By Debt Yield$4,000,000
$2,800,000
$

DSCR

1.59x

min 1.25x

LTV

70.0%

max 75%

Debt Yield

12.9%

min 9%

This requested loan amount passes every constraint — financeable at these terms.

Module Check

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What is Debt Yield?

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Related Concepts

Glossary

Debt Yield

Frequently Asked Questions

What is a good debt yield for a commercial loan?

Most commercial lenders, especially CMBS lenders, look for a minimum debt yield of 8%–10%.

Why do lenders use debt yield instead of just LTV?

Debt yield ignores interest rates and amortization entirely, so it can't be artificially improved by stretching the amortization period or by an appraisal that inflates value. It directly measures what return a lender would get on the loan amount if the loan were treated like an all-cash investment in the NOI.