Yield Maintenance Cost Calculator

Yield maintenance preserves lender yield.

Loan balance

Coupon rate %

UST rate %

Remaining years

YM spread bps

Yield maintenance cost

$937,500

Annual interest diff

$187,500

YM % of balance

0.06%

How the math works

Effective UST = UST + spread. Rate diff = coupon − effective. Cost = balance × diff × years.

$15M × (5.75% − 4.5%) × 5 = $937k YM cost = 6.25% of balance.

How to Use

Enter loan balance.
Enter coupon rate %.
Enter UST rate %.
Enter remaining years.
Enter YM spread bps.
Read yield maintenance cost.

Frequently Asked Questions

YM mechanics?

Prepay penalty = PV of difference between loan rate and current UST + spread over remaining term. Ensures lender gets promised yield. Agency loans (Fannie/Freddie) use YM; CMBS uses defeasance.

vs defeasance?

YM: pay cash penalty to lender. Defeasance: buy Treasury portfolio. YM typically simpler, sometimes more expensive. Defeasance requires specialist consultant but can arb Treasury curve. Each loan docs specify allowable method.

Typical cost?

Sensitive to rate environment. Loan rate > UST + spread: high YM cost. Loan rate near UST: minimal. 2022-24 rising rates: YM cheap for old low-coupon loans. 2021 rate lows: YM expensive to prepay new loans.

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.