Mortgage Debt Yield Calculator

Debt yield is the pure ratio of a property's annual net operating income to the loan against it. Unlike DSCR, it ignores rate and amortisation — it is an absolute yield on the debt. Commercial lenders typically want 10%+. 500,000 of NOI on a 5,000,000 loan is 10% debt yield — acceptable. Anything below 8% starts to get rejected by conservative lenders. Used alongside LTV and DSCR.

Commercial lending ratio.

Run it with sensible defaults

Using annual net operating income of 500,000, loan amount of 5,000,000, the calculation works out to 10.00%. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Annual Net Operating Income and Loan Amount — do not pull with equal force. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.

How the math works

Commercial lending ratio: annual NOI divided by loan amount. Expressed as a percentage.

What the headline rate hides

Lenders quote a rate; what you pay is a blend of that rate, fees, insurance, and any early-repayment penalty built into the product. The figure here isolates the core interest cost so you can compare like-for-like across deals — then add the other costs separately before signing anything.

What this doesn't capture

The figure excludes arrangement fees, valuation costs, legal fees, insurance, and any early-repayment charges — those can add several thousand to the headline cost. Rate changes at renewal for fixed-term deals will shift the picture further. Use this for the core interest/principal math and add the other costs on top.

Worked example

A multi-unit residential building generates 750,000 in annual net operating income. The lender will advance a loan of 6,500,000 against it. The debt yield calculation divides 750,000 by 6,500,000 and converts to a percentage:

750,000 ÷ 6,500,000 = 0.1154 = 11.54% debt yield

This result sits above the 10% threshold many commercial lenders prefer, suggesting the property's income is generating a reasonable absolute return on the loan amount. A debt yield below 8% on the same property would signal tighter margins and likely attract more scrutiny from conservative lenders.

Common scenarios

Debt yield matters in several contexts:

• Comparing two properties with different loan sizes: it strips away leverage to show pure income-to-debt productivity
• Assessing portfolio risk: properties with debt yield below 8% may face harder refinancing or renewal terms
• Stress testing: lenders often apply a minimum debt yield floor to qualify deals at all
• Multi-property portfolios: blended debt yield across a fund or REIT shows aggregate income strength relative to total borrowing

What the result shows and does not show

This calculator shows the annual income generated by a property as a percentage of the amount borrowed against it. It does not account for:

• Interest rate, amortisation period, or monthly debt service payments (use DSCR for that)
• Loan-to-value ratio or other security measures (use LTV for that)
• Operating expenses, tenant quality, or lease term length
• Market conditions, vacancy risk, or future income growth or decline
• Capital expenditure reserves or replacements

Debt yield is one signal among many. Lenders combine it with DSCR, LTV, and property condition to form a lending decision.

Educational illustration

This calculator is for educational illustration of the relationship between net operating income and loan amount. Results are not forecasts and do not account for individual circumstances, tax treatment, or changes in market conditions.