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Debt Yield vs DSCR vs LTV — Multifamily Comparison

Compare debt yield, DSCR, and LTV for commercial multifamily loan sizing—formulas, binding constraints, and when each metric drives proceeds.

By Multi-Family USA Editorial Team Reviewed by Scott Dillingham 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

MetricFormulaWhat it tests
Debt yieldNOI ÷ LoanLeverage vs NOI (rate-neutral)
DSCRNOI ÷ Debt serviceCash flow vs P&I
LTVLoan ÷ ValueLeverage 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

LTV binds near $10.1M—not debt yield or DSCR alone.

Present all three metrics in lender packages with downside stress. Read the debt yield and LTV framework and run the loan sizing calculator.

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Frequently asked questions

What is the difference between debt yield, DSCR, and LTV?
Debt yield equals NOI divided by loan amount. DSCR equals NOI divided by annual debt service. LTV equals loan amount divided by property value. Lenders size to the lowest proceeds result.
Which metric binds most often on stabilized deals?
It varies by rate environment and leverage targets. Debt yield often binds when spreads are tight; LTV may bind when values are aggressive; DSCR binds when rates rise relative to NOI.
Can a deal pass DSCR but fail debt yield?
Yes. Low rates or IO periods can support DSCR while loan balance stays high relative to NOI, failing debt yield floors.
How do I calculate max loan from each metric?
Max loan from debt yield = NOI ÷ min debt yield. Max from LTV = value × max LTV. Max from DSCR requires solving loan from allowed debt service at your rate and amortization.
Should sponsors optimize for one metric?
No. Model all three under base and downside cases. The binding constraint determines realistic proceeds.
Where can I run all three together?
Use the loan sizing calculator alongside individual debt yield and DSCR tools.
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