Finance category
Mortgage, loan, investing, tax, and money calculators.
Defeasance Calculator
Defeasance replaces your commercial loan's collateral with a portfolio of US Treasury securities sized to match remaining loan cash flows. The cost equals the PV of those future Treasury purchases plus transaction fees (broker, legal, rating agency). This calculator sizes the total defeasance cost for a CMBS prepayment.
Total defeasance cost
$5,088,824
Premium over balance
$88,824
Cost as % of balance
101.78%
Treasury portfolio cost
$5,030,173
Broker fee
$25,151
Monthly payment
$148,735
How the math works
On $5M balance, 4.5% rate, 36 months remaining, treasury 4.1%: monthly payment ~$27,780. PV of 36 × $27,780 at 4.1% discount ≈ $5.02M portfolio. Add $25K broker, $25K legal, $8.5K rating = $5.08M total — $80K (1.6%) premium over balance.
Defeasance is mechanically complex but conceptually simple: you're buying the right to prepay by assembling a Treasury portfolio that pays the lender exactly what your property collateral would have. The extra cost is the 'risk premium' (actually the spread between loan rate and treasury) plus transaction fees.
How to Use
- Enter loan balance, rate, months remaining, and current treasury yield matching the remaining term.
- Add defeasance transaction fees (broker, attorney, rating agency, accountant).
- Compare defeasance cost against a yield-maintenance alternative.
Frequently Asked Questions
Why defease instead of paying off?
Most CMBS loans prohibit straight prepayment. Defeasance is the only allowed way to 'release' the property as collateral. The loan technically stays on the books with the Treasury portfolio as substitute collateral.
How much do transaction fees run?
$20K-$80K total. Broker (who assembles Treasury portfolio): 0.5-2% of portfolio. Legal (specialized defeasance attorneys): $15K-$40K. Rating agency fee: $5K-$15K. Accountant/successor borrower: $2K-$5K. Scales up for larger loans.
When is defeasance cheaper than YM?
Rarely. YM typically runs 2-6% of balance in a normal environment; defeasance 4-10%+. Defeasance becomes cheaper only when YM formulas produce unusually large numbers (deeply declined rates). Most CMBS loans don't allow YM — defeasance or nothing.
How long does defeasance take?
30-60 days. Includes broker assembly of Treasury portfolio, legal review, rating agency confirmation, escrow setup. Plan the close around this — your refinance lender needs to understand the timeline.
Related Calculators
More Finance Calculators
Browse all finance →AI Cost Calculator
Compare token costs across OpenAI, Anthropic, and Google AI models. Calculate monthly API spending for GPT-4o, Claude, Gemini, and more.
Tip Calculator
Calculate the perfect tip and split the bill between friends. Choose preset percentages or enter a custom tip amount.
Bill Splitter Calculator
Split an uneven restaurant bill by item, divide tax and tip proportionally, and see exactly who owes whom.
Discount Calculator
Calculate sale price, discount amount, stacked discounts, sales tax, and total savings for any markdown.
Gas Mileage Calculator
Calculate MPG or km/L, estimate trip fuel cost, and compare annual fuel expenses between two vehicles.
Sales Tax Calculator
Add sales tax to a price, reverse-calculate the pre-tax amount from a total, and estimate tax for multiple items on one receipt.
Keep exploring
Next steps in Finance
Previous calculator
Deed Stamp Tax Calculator
State deed/doc stamp tax — Florida, Georgia, NC/SC and others charge a stamp per $100 or $500 of sale price.
Next calculator
Deferred Maintenance Calculator
Estimate the one-time catch-up cost of deferred maintenance and the discount it should trigger on a purchase offer.