Exit Debt Yield and Stabilized Underwriting in CRE Bridge Loans
Calculate exit debt yield with an explicit future balance, then compare takeout loan limits with payoff and refinancing costs.
Exit debt yield compares projected qualifying income at a future date with a stated future loan balance. Specify whether that balance is the full commitment, projected outstanding principal or refinance request. The ratio helps model an exit; it does not establish agency eligibility or guarantee repayment.
Keep current and future scenarios separate
Current debt yield uses current income and a stated current balance. A stabilized scenario uses projected income and the balance expected at the selected date, including relevant draws and repayments. Changing both numerator and denominator without labeling them hides the source of the difference.
For an interest-only loan on the same income and balance basis, DSCR equals debt yield divided by the interest rate, using decimals. A low debt yield alone does not determine whether interest is covered; compare it with the actual payment requirement.
A hypothetical stabilization case
Assume an $8 million balance, $400,000 of current income and $900,000 of projected stabilized income. Holding the balance constant:
| Scenario | Debt yield |
|---|---|
| Current: $400,000 / $8 million | 5.00% |
| Stabilized: $900,000 / $8 million | 11.25% |
The improvement depends on achieving the projected income. It does not prove that a lender will finance the property or that operating shortfalls and capital work are funded.
Interactive Bridge Take-Out & Exit Converter
Use this interactive tool to model exit debt yields against the required take-out loan constant and DSCR floor:
Translate an assumed target into proceeds
At a hypothetical 8% takeout target, $900,000 of income supports $11,250,000 under the DY test. At 9.5%, it supports $9,473,684. These are sensitivities, not Fannie Mae or Freddie Mac requirements.
In a separate payoff scenario with a $10 million balance, the latter DY-only limit leaves $526,316 before refinancing costs. A lower DSCR or LTV limit could increase the gap. State the changed payoff balance explicitly rather than carrying an $8 million example into a $10 million conclusion.
Check the complete exit
Calculate takeout proceeds under DY, DSCR and LTV, then compare usable funding with payoff, fees, reserves and other costs. Stress income, interest rate, value and timing independently. The OCC refinance-risk bulletin describes refinance risk as the inability to replace debt on reasonable terms at the required future date.
Use the bridge-to-permanent walkthrough, agency program guide and loan-sizing workbook. Confirm the current product requirements instead of applying an assumed agency debt-yield floor.
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