Question 1

What is debt yield, and why do lenders use it?

Accepted Answer

Debt yield is net operating income divided by the loan amount. Unlike LTV, it isn't affected by a rosy cap rate assumption on an appraisal — it's a direct check on whether the income alone, at a conservative yield, justifies the loan size. Many lenders added it as a backstop after LTV-based sizing proved too easy to game during periods of aggressive valuations.

Question 2

Why does my maximum loan differ from what I expected?

Accepted Answer

You're likely being constrained by a different test than you assumed. Check the binding-constraint indicator — if DSCR is binding, more equity won't help as much as improving income or extending amortization; if LTV is binding, the reverse is true.

Question 3

What if none of the three tests apply to my loan?

Accepted Answer

Turn off any test your lender doesn't use — a bank might size purely on LTV with no explicit debt-yield floor, for instance. With every test turned off there's nothing to size against, and the calculator says so instead of guessing.

Question 4

How does amortization length affect loan sizing under DSCR?

Accepted Answer

A longer amortization spreads the same loan amount over more payments, lowering the monthly payment and therefore the debt service — which raises the DSCR-constrained maximum loan. It's one of the few levers that increases loan size without changing the property's income or value.

Question 5

Can I use this for a residential DSCR loan instead of a commercial one?

Accepted Answer

The same three-test structure applies, though residential DSCR programs usually rely on the DSCR test alone rather than debt yield. Turn off LTV and debt yield if your lender only underwrites on DSCR.

Loan Sizing Calculator