Commercial mortgage underwriting
Debt Yield
Debt yield compares net operating income (NOI) with the loan amount and is usually expressed as a percentage.
Basic formula
Debt Yield = NOI ÷ loan amount
Educational definitionNo universal lender threshold is implied.
Why it matters in commercial financing
Debt yield gives a cash-flow-to-debt perspective that does not depend on the loan interest rate or amortization schedule. It can be reviewed alongside DSCR, LTV and the rest of the property and borrower underwriting rather than used as a standalone approval rule.
Important cautions
- Do not assume one universal minimum debt yield.
- Confirm the NOI the lender actually uses for underwriting.
- Debt yield does not replace DSCR, LTV or broader credit analysis.
- Lender policy, property type, market conditions and transaction risk can affect how the ratio is interpreted.
Discuss a real transaction
Move from the metric to the property and financing objective.
Worked debt-yield example
With illustrative annual NOI of $150,000 and a proposed $2,000,000 loan, debt yield is 7.5%. Increasing the loan to $2,500,000 with unchanged NOI reduces the figure to 6%. The calculation makes the effect of borrowing more visible, but it does not tell you the payment, interest cost or whether the lender will approve the request.
Further reading
Content reviewed September 9, 2026. These resources provide background; individual lender requirements and property circumstances differ. Illustrative calculations are examples, not financing offers.