Debt yield is the rate-neutral alternative to DSCR. It answers: what yield would the lender earn if they foreclosed and operated the property? The higher the debt yield, the safer the loan.
Debt yield became popular after 2008 because DSCR has a flaw: you can make a bad deal look good by extending amortization or riding a low rate. Debt yield ignores both — it only cares about NOI and loan size. That makes it the preferred metric for CMBS lenders, Fannie DUS, and any lender who plans to sell the loan to a risk-averse buyer.
Typical 2026 debt-yield floors:
If your deal clears DSCR but fails debt yield, the loan is rate-dependent. The lender is essentially saying: "This deal only works because rates are low — if we have to refinance at a higher rate, we\'re underwater."
CMBS and most agency lenders require 8–10%+. Bank lenders often want 10%+. Debt yield below 7% is generally un-financeable for institutional debt — you would need bridge or private money.
Conservative lenders (CMBS, agency) prefer debt yield because it is rate-neutral — it does not get distorted by low rates or long amortization. DSCR can be manipulated by extending the amortization schedule; debt yield cannot.
Because DSCR is rate-dependent. A deal with 1.30× DSCR at 5% interest may only be 1.05× at 7%. Debt yield tells you whether the deal works regardless of rate — which is what a portfolio lender actually cares about if they have to hold it long-term.
Only by reducing the loan amount. Unlike DSCR, you cannot improve debt yield by extending amortization or getting a lower rate. The only levers are raising NOI or borrowing less.
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