Debt Yield: The Lender's Rate-Independent Stress Test
Debt yield is the single most important CMBS underwriting metric — and the only major leverage test that does not flex with interest rates or appraisal values.
The Formula
Example: $1,200,000 NOI ÷ $15,000,000 loan = 8.0% debt yield
Why Lenders Care More About Debt Yield Than LTV
Loan-to-value depends on an appraisal, which depends on cap rates. When rates fall and caps compress, the same NOI produces a higher appraisal — and more available debt at the same LTV. That's a problem for lenders. Debt yield is rate-independent. A 9% debt yield means the property earns 9¢ of NOI per $1 of loan, period.
Minimum Debt Yield by Lender Type
- Agency Multifamily (Fannie/Freddie): 7.0–8.0%
- CMBS Conduit (office/retail/industrial): 8.0–9.0%
- CMBS Hospitality: 11.0–12.0%
- HUD 223(f): 6.5% (lowest in industry)
- Bridge / Debt Fund: 6.0–7.0% with stabilization plan
How Debt Yield Sizes a Loan
A lender with an 8% debt yield floor and a property with $1,200,000 NOI will cap the loan at $15,000,000 (1.2M ÷ 0.08). If the borrower wants more debt, they need higher NOI — not a better appraisal.
Calculate Debt Yield Free
Input NOI and loan amount, instantly see your debt yield and which CMBS programs your deal qualifies for.
Open Debt Yield Calculator →Frequently Asked Questions
What is debt yield in commercial real estate?
Debt yield is a property's Net Operating Income divided by the loan amount, expressed as a percentage. It tells a lender what unleveraged return they would earn if they had to take the property back at par. Unlike DSCR or LTV, it does not flex with interest rates or appraisal values.
How is debt yield calculated?
Debt Yield = NOI ÷ Loan Amount × 100. Example: $1,200,000 NOI ÷ $15,000,000 loan = 8.0% debt yield.
What is the minimum debt yield for a CMBS loan?
CMBS conduits typically require 8.0–9.0% for office, retail, and industrial; 7.0–8.0% for agency multifamily; and 11.0–12.0% for hospitality. HUD 223(f) accepts as low as 6.5%, the lowest in the industry.
Why do lenders prefer debt yield over LTV?
LTV depends on appraised value, which depends on cap rates, which compress when interest rates fall. A 5% cap appraisal yields more debt at the same LTV than a 6.5% cap on the same NOI. Debt yield strips out that appraisal noise — it is a true downside-leverage test that does not flex with the rate environment.