Reviewed by Craig Hoebing, AZ Commercial Mortgage Banker CMB-1047342 · Updated October 2026
Two ratios get mixed up because both start with property income. Debt service coverage divides net operating income by the annual loan payment. Debt yield divides that same income by the loan amount. The payment depends on the rate, the amortization, and whether principal is being paid. The loan amount does not. A low rate or an interest-only period can make coverage look strong while the loan is still large compared with the income. Lenders who worry about that second fact use a yield test so the coupon cannot inflate proceeds.
Here is arithmetic on made-up numbers, not a rule. Income of 100 and a loan of 1,000 is a debt yield of 10 percent, because 100 divided by 1,000 is 0.10. If the yearly payment on that loan is 80, coverage is 100 divided by 80, or 1.25. Change the payment to 50 because the rate is lower, and coverage rises while the yield stays 10 percent. None of those figures is a minimum from Capital Market Funds, a life company, a CMBS shelf, or a bank. They show the difference. Trepp and TreppTalk publish commercial real estate data and commentary. They are not a threshold we adopt.
Who tends to care about which test
Banks that finance income property often size to coverage, along with leverage and the sponsor. The OCC's March 2022 Commercial Real Estate Lending booklet describes that kind of risk for national banks and federal savings associations. It does not print a debt-yield floor for this website. Life companies and CMBS lenders more often add a yield test so proceeds do not rise just because the coupon fell. 'More often' is a pattern, not a promise that your quote will include the test. Read the sheet.
Arizona CMBS, when a conduit is even the right box, is Arizona CMBS. Commercial coverage language is Arizona commercial DSCR. The idea of a workable coverage ratio, still without a number we require, is what is a good DSCR. Definitions sit in the glossary. The Mortgage Bankers Association's research section is national context, not a grid.
How to use the calculator without inventing a rule
The DSCR calculator divides income you type by a payment you type. If you want a yield, divide income by the loan amount yourself, or use the rates and loan calculator when it asks for a yield you choose. The tools do not know which test a lender will enforce. A result above a figure you heard in a meeting is not an approval.
Capital Market Funds is not a Fannie Mae DUS lender. The office is 7373 E Doubletree Ranch Rd #255, Scottsdale, AZ 85258. The phone is (480) 495-8072. Arizona CMB-1047342 and NMLS 1445066. We arrange the loan with the capital source. We do not publish a required debt yield or a required DSCR.
Sources
Questions
- Is 10 percent a debt-yield minimum on this site?
- No. The 10 percent figure is 100 divided by 1,000 in a made-up example. It is not a lender's cutoff and not a Capital Market Funds rule.
- Why can DSCR rise when debt yield does not?
- Coverage uses the payment. A lower rate or an interest-only payment makes the payment smaller, so coverage rises. Debt yield uses the loan amount and ignores the rate.
- Do all CMBS and life-company loans use debt yield?
- Not as a promise. Many of those lenders use a yield test so a low coupon cannot inflate proceeds. Your term sheet says whether this loan does. We do not guarantee a cutoff.
- Does the OCC handbook publish the yield I need?
- No. The March 2022 booklet describes commercial real estate risk at national banks. It is not a rate sheet and not a required yield for a file this office arranges.