Yield Maintenance Prepayment Calculator
Simulate commercial mortgage prepayment penalties, present value cash flow differentials, and Treasury replacement benchmarks for CMBS, agency multifamily, and SBA loans.
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Calculating yield maintenance cost...
Frequently Asked Questions
What is Yield Maintenance in commercial loan prepayment?
Yield Maintenance is a prepayment penalty clause commonly found in commercial real estate loans, Fannie Mae/Freddie Mac multifamily mortgages, and conduit CMBS loans. It ensures the lender receives the exact same financial yield (cash flow) as if the borrower continued paying interest until maturity.
How is the Yield Maintenance penalty calculated?
The penalty equals the present value of the remaining interest payments that the lender would lose by having the loan prepaid, discounted at the current replacement benchmark rate (typically the current US Treasury note rate of matching maturity).
What is the difference between Yield Maintenance and Defeasance?
Yield Maintenance pays cash penalty directly to the lender to cancel the debt. Defeasance replaces the real estate collateral with a portfolio of government treasury bonds that generate the same cash flow to satisfy the debt.
How do SBA 504 and SBA 7(a) prepayment penalties work?
SBA 504 loans feature a declining 10-year prepayment penalty (from 100% of debenture interest in Year 1 down to 0% after Year 10). SBA 7(a) loans with maturities >= 15 years carry a 3-year penalty (5% Year 1, 3% Year 2, 1% Year 3).