Definition Yield On Debt
Lenders use this ratio to determine the risk involved in loaning money to a property owner by evaluating the.
Definition yield on debt. Lenders find it by dividing the net operating income of the property by the loan amount. Debt yield is a risk measure for mortgage lenders and measures how much a lender can recoup their funds in the case of default from its owner. The ratio evaluates the percentage return a lender can receive if the owner defaults on the loan and the lender decide to dispose of the mortgaged property. The debt yield ratio is a profitability measurement that calculates the amount the rate of return on a property by dividing the net operating income by the mortgage amount.
The debt yield is another metric for calculating the risk associated with a commercial real estate loan. As previously mentioned debt yield is calculated by taking a property s noi and dividing it by the total loan amount. 200 000 1 500 000 0 133 or 13 33. What does debt yield mean.
For instance if a commercial property s net operating income was 200 000 and the entire loan amount was 1 500 000 the debt yield would be.