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 commonly look for debt yield above a minimum threshold — often in the high single digits or low double digits, depending on the property type and the lender's appetite. Below that threshold, deals tend to attract more scrutiny. Used alongside LTV and DSCR.

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.

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 in the range many commercial lenders look for in property-backed financing, indicating the property's income provides a reasonable buffer above the loan amount. A materially lower debt yield on the same property would signal tighter margins and generally attract more lender scrutiny.

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 whose debt yield falls below a lender's minimum 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.