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.

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.