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Debt Yield vs DSCR vs LTV — Which Binds Your Loan?
Debt yield, DSCR, and LTV explained for multifamily sizing: formulas, worked examples, and which constraint usually caps proceeds.
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By Multi-Family USA Editorial Team · Reviewed by Scott Dillingham · Published · Updated · 9 min read
How debt yield, DSCR, and LTV work together
Multifamily lenders size commercial apartment loans using three core metrics. Proceeds bind to the most restrictive result—not the metric the sponsor prefers.
Quick formula reference
| Metric | Formula | What it tests |
|---|---|---|
| Debt yield | NOI ÷ Loan | Leverage vs NOI (rate-neutral) |
| DSCR | NOI ÷ Debt service | Cash flow vs P&I |
| LTV | Loan ÷ Value | Leverage vs appraised value |
When each metric tends to bind
Debt yield often binds on stabilized agency deals when lenders want rate-independent leverage checks. DSCR binds when interest rates rise faster than NOI growth. LTV binds when purchase prices or value opinions run ahead of income support.
Worked comparison example
Assume normalized NOI of $1,000,000, value $13,500,000, min debt yield 9.5%, min DSCR 1.25x, max LTV 75%, and annual debt service of $780,000 on a $10.2M loan (1.28x DSCR).
- Debt yield max: $1M ÷ 0.095 ≈ $10.53M
- LTV max: $13.5M × 75% = $10.13M
- DSCR supports roughly $10.2M in this illustration
That decision sits inside our Multifamily Underwriting Calculators hub, where Multi-Family USA maps lender fit and structure tradeoffs.
That decision sits inside our Multifamily Financing Guides hub, where Multi-Family USA maps lender fit and structure tradeoffs.
That decision sits inside our Multifamily Financing Guides hub, where Multi-Family USA maps lender fit and structure tradeoffs.
That decision sits inside our Investor Playbooks hub, where Multi-Family USA maps lender fit and structure tradeoffs.
That decision sits inside our Compare Multifamily Capital Options hub, where Multi-Family USA maps lender fit and structure tradeoffs.
That decision sits inside our Multifamily Underwriting Calculators hub, where Multi-Family USA maps lender fit and structure tradeoffs.
Operators comparing options often continue with Multifamily DSCR Requirements by Lender Type before booking a strategy call.
LTV binds near $10.1M—not debt yield or DSCR alone.
Sponsor takeaway
Present all three metrics in lender packages with downside stress. Read the debt yield and LTV framework and run the loan sizing calculator.
Book a strategy call or send your multifamily deal for a free review.
Frequently asked questions
What is the difference between debt yield, DSCR, and LTV?
Which metric binds most often on stabilized deals?
Can a deal pass DSCR but fail debt yield?
How do I calculate max loan from each metric?
Should sponsors optimize for one metric?
Where can I run all three together?
Book a strategy call or send your multifamily deal for a free review.