Debt Yield Calculator
Calculate debt yield ratio for commercial real estate financing. Essential metric for bank loan underwriting.
How it works
Debt Yield = (NOI ÷ Loan Amount) × 100. Banks use this to assess loan risk independent of interest rates.
Example
$36,000 NOI ÷ $400,000 loan × 100 = 9% debt yield.
FAQ
What is a good debt yield?
Generally, 10%+ is considered good. Many commercial lenders prefer 10-12% minimum. Higher debt yields indicate lower risk for the lender.
How is debt yield different from cap rate?
Debt yield uses loan amount in denominator, while cap rate uses purchase price. Debt yield is independent of down payment size and focuses purely on debt coverage.
Why do lenders use debt yield?
Debt yield is independent of interest rates and loan terms. It shows the property's ability to cover the debt based purely on NOI and loan size.
Can debt yield help determine loan amount?
Yes. If you know a lender's minimum debt yield requirement, you can calculate maximum loan amount: Loan Amount = NOI ÷ (Debt Yield ÷ 100).
Is debt yield the same as debt service coverage ratio?
No. Debt yield uses loan amount, while DSCR uses actual debt service payments. DSCR considers interest rate and term; debt yield does not.