Yield Maintenance Breakeven Calculator

Yield maintenance prepayment needs big rate savings. This calculator finds the breakeven.

Balance

Note rate

Market rate

Remaining years

Min YM floor %

YM penalty

$420,000

Breakeven annual savings

$120,000

Actual refi savings

$420,000

How the math works

YM = balance × (note − market) × remaining years, floored at minimum %. Breakeven = YM ÷ remaining years.

YM penalties effectively make the lender whole for lost interest — refi only when there's meaningful additional value beyond just rate savings (longer term, cash-out, release of covenants). Pure rate-savings refi under YM rarely pencils.

How to Use

Enter loan balance.
Enter note rate %.
Enter current refi market rate %.
Enter remaining years.
Enter minimum YM floor %.
Read YM penalty and breakeven.

Frequently Asked Questions

YM formula?

YM = remaining balance × max(0, note rate − Treasury yield) × remaining term, discounted at Treasury yield. Some loans floor at 1-3% of balance regardless. Intended to compensate lender for lost interest.

When it makes sense?

Market rate must drop enough that refi savings over remaining term exceed YM penalty + refi transaction cost. Typically need 150-250 bps rate drop for YM refi to pencil. Smaller drops: wait for prepay window.

Workarounds?

Partial prepay (some YM loans allow 20-25% annual curtailment penalty-free). Defeasance (for CMBS, cheaper when Treasury yields low). Sale with loan assumption (buyer takes loan, no YM trigger). Each avoids full YM penalty.

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.