Prepayment Yield Maintenance Calculator

YM protects lender yield. This calculator computes.

Principal balance

Note rate %

Treasury reinvestment rate %

Months to maturity

YM penalty

$484,905

Penalty % of principal

6.47%

Note vs treasury spread

2.00%

How the math works

Penalty = PV of monthly rate differential over remaining term, discounted at treasury rate. Floor: 1% of principal.

$7.5M at 6.5% with 3.5 yrs to maturity and treasury at 4.5%: ~$475k penalty (6.3% of principal). Significant drag on refi or sale economics — factor into decision timing.

How to Use

Enter principal balance.
Enter note rate %.
Enter treasury reinvestment rate %.
Enter months remaining to maturity.
Read yield maintenance penalty.

Frequently Asked Questions

How it works?

Penalty = PV of (note rate − reinvestment rate) over remaining term. Idea: lender can reinvest paid-off principal at lower treasury rate; penalty compensates for differential. If treasury rose above note rate: no penalty (even slight gain).

Magnitudes?

Rate fell 200 bps since origination: penalty 8-15% of principal on 5-7 years remaining. Rate flat: minimal penalty (often just floor fee). Rate rose: near zero or minimal (varies by formula; typically floor of 1%).

Defeasance alternative?

CMBS loans often use defeasance instead of YM. Borrower purchases treasury securities producing same cash flow. Substitutes collateral. Similar economic impact but more complex; specialized agents required. Different transaction pathway, same economic effect.

How does this affect my portfolio-level metrics?

Single-asset impact rarely matters in isolation for a portfolio of 20+ assets, but systematic patterns do. If the same issue shows up across 10% of your portfolio, the aggregate impact is meaningful. Track this metric at the portfolio level quarterly. Institutional operators aggregate these monthly into a KPI dashboard for investors and lenders.