Finance category

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Defeasance Premium Calculator

Defeasance substitutes a Treasury portfolio for real estate collateral to release a CMBS loan. This calculator sizes the premium.

Loan balance

Note rate %

Treasury rate %

Months remaining

Consultant/legal fees

Total defeasance cost

$749,333

Treasury premium

$664,333

Total payoff with balance

$12,749,333

How the math works

Defeasance cost = Treasury portfolio premium (PV of rate spread × balance × term) + consultant/legal fees.

Start the defeasance process 45-60 days before planned payoff. Lock Treasury purchases only after title and payoff figures are finalized; day-rate movement can swing premium 2-5% overnight.

Editorial noteMaintained by EveryCalc - Reviewed June 2026

EveryCalc calculators are designed for fast, practical estimates with transparent inputs and no required account. We use plain formulas, visible assumptions, and related tools so visitors can check the result from more than one angle.

Results are informational only. For financial, tax, legal, medical, construction, or other high-impact decisions, verify the output against primary sources or a qualified professional.

Learn more about our review process on the EveryCalc methodology page.

How this calculator works

What this page estimates

This Defeasance Premium Calculator is built to give a quick, browser-based estimate for defeasance premium. Defeasance substitutes a Treasury portfolio for real estate collateral to release a CMBS loan. This calculator sizes the premium. The inputs stay on the page during normal use, and the result should be treated as an estimate for planning, comparison, or education rather than professional advice.

Calculation approach

The calculator applies the standard relationship implied by the inputs, then formats the answer so it can be checked and reused. For finance tools, the most important step is using consistent units, rates, time periods, and assumptions before comparing the result with another calculator or outside quote.

Example workflow

For example, start with a realistic value you already know, change one input at a time, and watch how the answer moves. That makes it easier to tell whether the result is being driven by the main amount, the rate, the time period, or a unit conversion.

Practical checks

Use current, real-world numbers when the result affects money, health, tax, or legal decisions.
Run a low, base, and high case when the inputs are estimates.
Check the related calculators below when the next decision depends on a different assumption.

How to interpret the defeasance premium result

Best use

Use the result as a planning number for comparing payments, rates, returns, tax reserves, or cash-flow choices before you request a quote or make a commitment.

Cross-check

Compare the answer with the contract, lender estimate, tax form, brokerage statement, payroll record, or invoice that will control the real-world outcome.

Watch for

Do not rely on a single optimistic rate, return, or fee assumption. Money pages work best when you run low, base, and high cases and keep professional advice separate from the estimate.

This page belongs to the Finance calculator library, so the answer should be read in the context of the decision you are modeling rather than as a universal rule.

Before relying on this defeasance premium estimate

Most calculator mistakes come from the inputs, not the arithmetic. Use this short audit before you reuse the answer in a spreadsheet, quote, application, or important conversation.

Confirm source numbers

Match balances, rates, fees, taxes, income, and payment dates against the lender quote, payroll record, tax form, statement, invoice, or contract.

Separate cash flow from total cost

A lower monthly payment can still cost more over time if fees, interest, taxes, or a longer term are hidden in the structure.

Run conservative cases

Test at least one higher-cost or lower-return case before using the output for a purchase, refinance, investment, loan, or tax decision.

Rerun this page when the rate, price, term, fee, tax rule, income, expense, or expected holding period changes.

How to Use

Enter loan balance.
Enter note rate.
Enter Treasury rate.
Enter months remaining.
Enter defeasance consultant fee.
Read total defeasance cost.

Frequently Asked Questions

How does it work?

Borrower buys a Treasury portfolio whose coupons replicate the remaining loan payments. The portfolio is pledged to the trust in place of the real estate, freeing the asset for sale or refinance.

Premium drivers?

Primary driver is rate differential — note rate above current Treasuries inflates premium. Smaller drivers: cost of securities, consultant fees ($35-75k), legal and rating agency fees.

Defease or yield maintain?

Different loans allow different exits. Read the docs. When both are allowed, defeasance is often cheaper on low-coupon loans and near maturity; YM is simpler and usually faster.

How often should I rerun this?

Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.