DSCR compared with Debt yield
| Decision point | DSCR | Debt yield |
|---|---|---|
| Formula | NOI / annual debt service | NOI / loan amount |
| Interest rate effect | Direct | None in the formula |
| Amortization effect | Direct | None in the formula |
| Loan amount effect | Through debt payment | Direct |
| Primary signal | Payment coverage | Income yield on lender exposure |
How the difference changes a deal
With $30,000 NOI, a $225,000 loan, and $20,400 annual debt service, DSCR is 1.47x and debt yield is 13.3%. An interest-rate change can reduce DSCR even when NOI and debt yield remain unchanged.
A practical decision framework
- Calculate both from a consistently defined NOI.
- Use the proposed loan terms for DSCR, including amortization and rate assumptions.
- Do not assume a strong result on one metric overrides weak collateral, tenancy, or borrower risk.
Frequently asked questions
Why does debt yield ignore interest rate?
Debt yield is designed to compare property income directly with lender exposure, independent of the payment schedule.
Can DSCR fall while debt yield stays the same?
Yes. A higher interest rate or shorter amortization raises debt service without changing NOI or loan balance.
Do all lenders require debt yield?
No. Requirements vary by property type, loan program, lender, and market conditions.
This guide is educational and does not provide investment, lending, tax, legal, or appraisal advice. Verify inputs and requirements for the specific property and jurisdiction.
Compare the strategies on the actual property.
PropLurk connects six underwriting models with one acquisition pipeline.