Loan sizing: LTV, DSCR and debt yield
The lender lends to the tightest of three constraints.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: loan sizing: ltv, dscr and debt yield.Updated 30 September 2026
Part of real estate models, with the models, labs and guides around it.
What it does
Real estate lenders apply three constraints at once and lend to the tightest. Loan-to-value caps the loan against price; debt service coverage requires NOI to exceed the annual payment, which the mortgage constant turns into a loan amount; debt yield, NOI over the loan, is the appraisal-independent floor that catches an over-levered loan when values are inflated. The schedule computes all three and names the one that binds.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 25–30: Maximum loan to value (LTV), Minimum debt service coverage ratio (DSCR), Minimum debt yield, Interest rate, % a year…
- Debt, rows 6–15: Year 1 NOI, Mortgage constant, Loan at maximum LTV, Loan at minimum DSCR…
- Assumptions, rows 33–37: Cap rate at refinance, Permanent loan: maximum loan to value, Permanent loan: minimum DSCR, Permanent loan: minimum debt yield…
- Exit, rows 5–13: Forward NOI at the refinance, Value at refinance, Loan at maximum LTV, Loan at minimum DSCR…
What a reviewer looks for
- A target leverage set as an input and NOI made to fit it.
- DSCR sized on interest only when the loan amortises.
- Debt yield omitted because LTV looked fine.
Learn it, then build it
Read · Guide · 13 min
Real Estate Financial Modelling: Why Corporate Finance Mechanics Break Here
Read · Guide · 11 min
Credit and Covenant Modelling: What a Lender Actually Tests
Vocabulary: Loan-to-Value (LTV), Debt Yield, DSCR (Debt Service Coverage Ratio).