📉 Want Better Loan Terms? Debt Yield Is the Metric Lenders Care About 🧠

💰 The Secret to Lower Mortgage Rates: How Debt Yield Really Works 🔑

February 03, 2026•2 min read

💰 The Secret to Lower Mortgage Rates: How Debt Yield Really Works 🔑

📉 Want Better Loan Terms? Debt Yield Is the Metric Lenders Care About 🧠

The Secret to Getting Lower Rates: Understanding Debt Yield

When borrowers ask how to get a lower interest rate, they usually expect answers like credit score, down payment, or loan-to-value. Those matter—but in commercial and investment lending, debt yield often matters more.

If you understand debt yield—and structure your deal around it—you can materially improve pricing, leverage, and lender confidence.

What Is Debt Yield?

Debt yield measures how much cash flow a property produces relative to the loan amount.

Debt Yield Formula:

Net Operating Income (NOI) ÷ Loan Amount

Example:

·NOI: $500,000

·Loan Amount: $5,000,000

·Debt Yield = 10%

From a lender’s perspective, this answers one critical question:
If everything goes wrong, how strong is the income supporting this loan?

Why Lenders Love Debt Yield

Unlike DSCR or LTV, debt yield ignores interest rates and property values. It’s pure income-to-loan math.

That’s why lenders use it to:

·Control downside risk

·Compare deals across markets

·Justify lower pricing on strong assets

Higher debt yield = safer loan = better terms for the borrower.

How Debt Yield Impacts Your Interest Rate

Most lenders have minimum debt yield thresholds:

·6–8% → Aggressive leverage, higher rates

·9–10% → Market-rate pricing

·11–13%+ → Best-in-class pricing, flexible terms

Borrowers who miss this metric often over-leverage and wonder why rates come back high. Borrowers who optimize debt yield get rewarded.

Debt Yield vs DSCR vs LTV (Quick Comparison)

Metric

What It Measures

Why It Matters

DSCR

Cash flow vs payments

Rate-sensitive

LTV

Loan vs value

Market-dependent

Debt Yield

NOI vs loan

Stable, lender-driven

Debt yield is the anchor metric when markets are volatile or values are uncertain.

How to Improve Your Debt Yield

You can improve debt yield by:

·Reducing loan proceeds slightly

·Increasing NOI through rent optimization

·Removing non-income expenses

·Structuring interest-only or partial IO correctly

This is where experienced mortgage brokers create real value—not by “rate shopping,” but by deal engineering.

Why Medallion Funds Focuses on Debt Yield

At Medallion Funds, we structure loans the way lenders actually underwrite them. That means:

·Matching deals to the right capital stack

·Positioning income correctly

·Avoiding over-leverage that kills pricing

Lower rates aren’t negotiated—they’re earned through structure.

If you want better loan terms, start with better metrics.

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Bill Rapp - Commercial & Residential Mortgage Broker

Whether you're a first-time homebuyer, a seasoned investor, or a business owner with ambitious plans, securing the right financing is crucial. At Medallion Funds, we take the guesswork out of mortgages, offering a comprehensive suite of residential and commercial loan options to fit your unique needs. Looking for Your Dream Home? We understand the excitement and challenges of navigating the residential real estate market. Our experienced mortgage brokers will guide you through every step, from pre-qualification to closing. We offer a variety of loan programs to suit your financial situation, including: • Fixed-rate mortgages: Offering stability with predictable monthly payments. • Adjustable-rate mortgages (ARMs): Providing competitive rates for a set period. • FHA loans: Making homeownership accessible with lower down payments. • VA loans: Rewarding veterans with attractive rates and flexible terms. Investing in Your Business Future? Growth often requires capital, and we can help you unlock the potential of your commercial property. Our brokers specialize in a wide range of commercial loan options, including: • Purchase loans: Financing the acquisition of new buildings or land. • Construction loans: Facilitating the development of your project. • Refinance loans: Restructuring your existing mortgage for better terms. • SBA loans: Providing access to government-backed financing for qualified businesses. The Medallion Funds Difference: We go beyond simply finding a loan. We take the time to understand your goals and develop a personalized strategy. Here's what sets us apart: • Expertise: Our brokers have a deep understanding of both residential and commercial lending. • Competitive Rates: We leverage our strong lender relationships to secure the best possible terms. • Streamlined Process: We handle the paperwork, keeping you informed every step of the way. • Exceptional Service: We're committed to providing you with a positive and stress-free experience. Ready to Take the First Step? Contact Medallion Funds today for a free consultation. Let's discuss your financing needs and help you achieve your dreams!

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