The cap rate the lender earns on its own loan.
The Debt Yield is the annual net operating income of a property divided by the total loan amount, expressed as a percentage. It represents the unlevered, in-place return a lender would earn if the loan were the only thing standing between the lender and the asset — effectively, the cap rate on the lender's loan.
Debt Yield emerged as a primary underwriting metric after the 2008 crisis, when CMBS lenders realized that DSCR and LTV could both be juiced by low interest rates and inflated appraisals. Debt Yield doesn't care about either — it strips out rate and value and asks one question: "If we owned this loan and had to take back the property tomorrow, what unlevered cash return do we get?"
A debt yield of 10% means the property's NOI is one-tenth of the loan amount — the lender would earn a 10% cash yield on its loan if it took the keys. Most institutional commercial lenders today require a minimum 8–10% debt yield on stabilized commercial loans, with 10%+ considered conservative. CMBS in the post-2008 era typically requires 9–10%.
The relationship to DSCR is direct: at any given interest rate and amortization, debt yield can be calculated from DSCR (and vice versa). But debt yield's strength is that it doesn't move when rates move — a 9% debt yield is a 9% debt yield whether 10-year Treasuries are at 2% or 5%, while DSCR will compress dramatically in a high-rate environment at the same loan amount.
For borrowers, debt yield is the metric that most often constrains loan size on commercial deals. Even when LTV and DSCR look fine, a property that doesn't hit the lender's debt-yield floor will get re-cut. The fix is the same as on DSCR: raise NOI or lower the loan.
| Property: 24-unit multifamily | |
| Stabilized NOI | $340,000 |
| Proposed loan amount (75% LTV of $5.2M) | $3,900,000 |
| Debt Yield = $340,000 ÷ $3,900,000 | 8.72% |
| Lender minimum debt yield | 9.50% |
| Loan re-sized to hit 9.5% DY | |
| Maximum loan = $340,000 ÷ 0.095 | $3,578,947 |
| New LTV | 68.8% |
DSCR measures NOI ÷ debt service (P&I); it depends on interest rate and amortization. Debt yield measures NOI ÷ loan amount; it's rate-independent. The same property can have a 1.40 DSCR at 5% rates and a 1.05 DSCR at 8% rates — but the debt yield doesn't change at all.
For commercial stabilized properties, 9–10% is the institutional standard. 8% is achievable on top-tier multifamily in primary markets. Anything below 7% would be considered aggressive on a commercial loan today.
Debt yield tells the lender what unlevered return they'd get if they took back the property. It strips out the noise of interest rates and appraised values and asks the direct question: how much of this loan can the property's income actually service in cash?
Same as DSCR: raise NOI (rents, expense control) or reduce the loan amount. Lower leverage is the most common fix when debt yield is the binding constraint on loan sizing.
Rarely — small-balance residential DSCR programs typically don't apply a debt yield test. Debt yield is most common on $1M+ commercial, multifamily, and CMBS loans.
Matrix underwrites commercial loans across DSCR, LTV, LTC, and Debt Yield — finding the structure that actually maximizes proceeds for your deal.
