The tests a lender will actually run
Debt service from your loan terms, and the four numbers underwriting turns on — DSCR, debt yield, break-even occupancy and LTV — computed from the NOI your rent roll produced, not one typed in beside it.
Four tests, and the one that usually binds
A deal that clears DSCR comfortably can still fail on debt yield, and the reverse almost never happens. Knowing which constraint is actually holding your loan size down is the difference between negotiating the right term and the wrong one.
- DSCR, against the floorCoverage from the rent roll's NOI and the real debt service, shown against the threshold the loan has to clear.
- Debt yield, which no amortization fixesNOI over loan amount. It ignores the payment entirely, so stretching the term does nothing to it — which is exactly why lenders adopted it.
- Break-even occupancy and the balloonHow full the building must be to pay for itself, and what is still outstanding at maturity if your hold runs past the loan.
Debt
DSCR
1.46x
Lender floor 1.25x
Debt yield
11.11%
Lender floor 10%
Break-even occupancy
67.4%
20.5 pts of cushion
LTV
65.0%
$10,890,000 loan
- Monthly debt service
- $68,832
- Annual debt service
- $825,987
- Rate / amortization
- 6.50% / 30 yr
- Balance at year 5
- $10,194,235
Debt yield usually binds before DSCR does, and a longer amortization cannot improve it.
Why debt yield is the one worth watching
DSCR asks whether the income covers the payment. That makes it sensitive to everything that moves the payment — the rate, the amortization period, whether you are interest-only this year.
Debt yield asks a different question entirely: what would the lender earn if they ended up owning the building? It is NOI divided by the loan, and the payment never enters into it.
That is why it binds. You can stretch amortization from 25 years to 30 and watch DSCR improve; debt yield does not move a basis point. A borrower who understands that walks into the conversation asking about proceeds rather than about term — and you can check it yourself before you get there.
Coverage is only as good as the income under it
A DSCR computed from a number somebody typed into a box tells you very little. These four all rest on NOI, so they inherit whatever that NOI was built from.
- Derived from the leasesIncome comes from the rent roll — the signed leases and whatever lease-up you have actually assumed — less the real operating expenses.
- Which means a lender can trace itEvery figure runs back to a clause in a document you uploaded. A lender who can follow your NOI back to a lease asks fewer questions about it.
Debt — 24 months interest-only
DSCR, IO period
1.71x
Interest only, months 1–24
DSCR, after IO
1.43x
Amortizing, months 25+
Debt yield
11.11%
Unchanged — IO does not move it
LTV
65.0%
$10,890,000 loan
- Payment, IO period
- $58,988
- Payment, amortizing
- $70,460
- Rate / amortization
- 6.50% / 30 yr
- Balance at year 5
- $10,435,324
The payment RISES when interest-only ends — $58,988 to $70,460 — because the same principal now amortizes over a shorter remaining life. Coverage falls from 1.71x to 1.43x on the same NOI.
Questions people ask
What does DealWise model on the debt side?
Monthly debt service from your loan terms, including any interest-only period and the balloon balance at maturity, plus the four tests a lender applies: DSCR, debt yield, break-even occupancy and LTV. All of it runs off the NOI your rent roll produced rather than a figure typed in beside it.
What is debt yield and why does it matter?
NOI divided by the loan amount. It answers what return the lender earns if they foreclose and own the building, which is why it became standard after 2008. It matters because it usually binds before DSCR does — and unlike DSCR it cannot be improved by a longer amortization, since it never touches the payment at all.
Does it handle interest-only periods?
Yes. The schedule carries the interest-only months explicitly, so coverage during the IO period and coverage after it are different numbers — which is the point, because a deal that clears 1.25x while interest-only can fall below it the month amortization starts.
What about the balloon?
The outstanding balance at maturity is computed from the schedule, and the model shows whether your hold period runs past it. A five-year hold on a five-year loan is a refinance you have not modelled yet.
What is break-even occupancy?
How full the building has to be before it covers operating expenses and debt service. It is the most direct answer to how much room the deal has before it stops paying for itself, and it is reported with the cushion against current occupancy in points.
Where this goes next
DSCR calculator
Coverage and the max loan it supports. Free, no signup.
Debt yield calculator
The test that usually binds first.
Break-even occupancy
How empty it can get before it stops covering its bills.
CRE loan terms explained
Amortization, interest-only and the balloon.
All capabilities
Everything else the product does.
Brief a lender
The job this capability exists for.
Size the loan the income actually supports.
Upload the documents, let DealWise build the rent roll, then put your loan terms against it. DSCR, debt yield, break-even occupancy and the balloon, all from the same NOI. Free plan, no credit card.