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Debt Yield Calculator

Net operating income divided by loan amount. The rate-independent sanity check UK commercial lenders run alongside DSCR and ICR. Most lenders want 8.5% to 10.5% on UK investment property.

InputsDY.01
Lender debt yield threshold9.0%
ResultLIVE
Debt yield · NOI ÷ loan amount
Headroom over threshold·
Max loan at threshold·
Loan surplus / (cap)·
Pending input
Enter NOI and loan amount to see whether debt yield clears.

For illustrative purposes only. Not advice.

How to read the result

  • 10% and above · comfortable. Cushions the lender against rate-driven refinance shock.
  • 8.5 to 9.9% · standard investment-grade range. Most UK lenders sit here.
  • 7.5 to 8.4% · tight. Expect lower LTV cap, higher pricing, or a covenant-led lender.
  • Below 7.5% · lenders typically decline or insist on materially lower LTV.

The formula

Debt yield = (Net Operating Income ÷ Loan Amount) × 100

Debt yield matters because rates move. A deal that clears ICR at 6.0% pay rate today may fail ICR at 8.5% pay rate on refinance in five years. Debt yield asks the same question without reference to rates: how much income does this property throw off relative to the debt secured against it?

Worked example

Mid-market industrial unit, North West. Net rental income of £125,000 a year after voids and ground rent. Investor asking for a £1.3m commercial mortgage at 65% LTV against a £2.0m purchase price.

Debt yield is £125,000 ÷ £1,300,000 = 9.6%. Comfortably inside the 8.5 to 10.5% standard range. Most UK lenders on industrial property will quote this without question.

Debt yield versus cap rate, quickly

Cap rate is NOI ÷ property value. Debt yield is NOI ÷ loan. Mechanically, debt yield equals cap rate divided by LTV. A 6.5% cap rate at 65% LTV produces a 10% debt yield. A 6.5% cap rate at 75% LTV produces an 8.7% debt yield. As LTV climbs, debt yield falls, which is why lenders use it to cap how high they will gear a deal.

Reminder. For illustrative purposes only. These calculators are educational. They are not advice. Actual lender pricing and underwriting decisions depend on covenant, LTV, sector, property condition and dozens of factors a calculator does not see. Always validate with a regulated advisor before committing to finance.

Frequently asked

What is debt yield in commercial mortgage lending?

Debt yield is Net Operating Income divided by Loan Amount, expressed as a percentage. It is the lender's belt-and-braces sanity check that sits alongside DSCR and ICR. UK commercial lenders typically want 8.5% to 10.5% on investment property.

Why do lenders use debt yield as well as DSCR?

DSCR and ICR depend on the current interest rate. When rates are low, both ratios look healthier than they actually are. Debt yield strips rates out: it asks how much income the property produces relative to the loan, regardless of how cheap the debt is right now. If the loan refinances onto a higher rate in five years, debt yield is the metric that still holds up.

What is a good debt yield?

On UK investment commercial mortgages, 10% and above is comfortable for most lenders. 8.5% to 10% is the typical investment range. Below 8% gets tight and usually means the deal is priced off a low-rate environment that the lender does not want to underwrite into the long run.

Is debt yield the same as cap rate?

No. Cap rate is NOI divided by property value. Debt yield is NOI divided by loan amount. The two move differently as LTV changes. At 65% LTV, debt yield is roughly cap rate divided by 0.65, so a 6.5% cap rate at 65% LTV produces a 10% debt yield.

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