Debt Yield Calculator
Calculate debt yield from NOI and loan amount, and see the maximum loan a lender's debt yield floor allows.
Use this free calculator from CapitalAx Commercial Lending to analyze your commercial financing scenario. For personalized guidance on your specific deal, request a quote or call our team.
What is Debt Yield?
Debt yield is annual net operating income divided by the loan amount. It answers the lender's bluntest question: if this loan goes bad on day one and we take the property back, what return does the income produce on our balance? Because the answer ignores interest rate, amortization, and market value, changing the rate or stretching the amortization does not move it at all.
The Debt Yield Formula, with a Worked Example
Debt yield equals NOI divided by loan amount, expressed as a percentage. A property producing $1,000,000 in NOI with a $10,000,000 loan carries a 10 percent debt yield. The formula also runs in reverse and that is how it constrains proceeds: maximum loan equals NOI divided by the lender's minimum debt yield. The same $1,000,000 NOI against an 11 percent floor supports about $9.09 million, so a one point move in the floor cut proceeds by more than $900,000 with nothing about the property changing.
Where Debt Yield Gates Real Deals
Debt yield floors vary by lender, asset class, and market. Hotels sit at the demanding end, where institutional lenders generally want debt yields in the 11 to 13 percent range before leverage opens up. Agency multifamily floors generally run 7 to 8 percent. On any deal, lenders size the loan to the lowest of three constraints, DSCR, LTV, and debt yield, and in low rate environments debt yield is often the one that binds. Run your numbers here, then check the deal's coverage with our DSCR calculator.
Frequently Asked Questions
What is debt yield?
Debt yield is a property's annual net operating income divided by the loan amount, shown as a percentage. It tells a lender what return the property itself would produce on the loan balance if the lender had to take the asset back. A property with $1,000,000 in NOI and a $10,000,000 loan has a 10 percent debt yield.
How do you calculate debt yield?
Divide annual net operating income by the total loan amount, then multiply by 100. The calculator above does this for you. Unlike DSCR, the result does not change with the interest rate or amortization schedule, which is exactly why lenders use it.
What is a good debt yield?
Each lender sets its own floor and it varies by asset class and market. Institutional hotel lenders generally look for debt yields in the 11 to 13 percent range, while agency multifamily floors generally run 7 to 8 percent. Confirm the floor with your lender because it is a program level decision.
Why do lenders use debt yield instead of DSCR?
DSCR improves when rates drop or amortization stretches, so a deal can look safer without the property changing at all. Debt yield strips out financing terms entirely and measures the property's income against the loan balance. That makes it a consistent risk gauge across rate environments, which is why CMBS and institutional lenders lean on it.
How does debt yield limit my loan amount?
Flip the formula: maximum loan equals NOI divided by the lender's minimum debt yield. A property with $800,000 in NOI facing a 10 percent debt yield floor supports at most $8,000,000, no matter what the DSCR or LTV math would otherwise allow. The lowest of the three constraints wins.
What is the difference between debt yield and cap rate?
Cap rate divides NOI by the property's value, while debt yield divides NOI by the loan amount. If you borrow at full value the two are equal, and the more equity you put in, the more the debt yield exceeds the cap rate.