Tap to get financing
Commercial Real Estate Loans
Loan Options
Permanent FinancingLoans Under $1MBridge LoansMezzanine FinancingConstruction LoansUSDA 538 Loan ProgramLife Company LoansSBA 7(a) LoansSBA 504 Loan ProgramFannie Mae LoansFreddie Mac LoansCMBS LoansHUD Multifamily LoansFix and Flip LoansHUD 223(f) LoansHUD 221(d)(4) LoansHUD 223(a)(7) LoansHUD 241(a) LoansHUD 232 LoansHUD 232/223(f) LoansHUD 232 LEAN LoansHUD 232/223(a)(7) Loans
Property Types
All Property TypesRetailOfficeIndustrialApartmentsSelf StorageHotelLandChurchSchoolAuto DealershipAuto Repair ShopCar WashGas StationHealthcareMedical OfficeDental OfficeVeterinaryFitness CenterBowling AlleyConvenience StoreDay Care CenterGolf CourseAnchored Strip CenterRestaurantMarinaWarehouseFuneral Home
Resources
BlogCurrent Mortgage RatesForms and TemplatesCommercial Property for SaleCommercial MLS GuideGlossaryVideo LibraryApply OnlineHow to Get a CRE LoanFrequently Asked Questions
Calculators
Commercial Mortgage CalculatorCap Rate CalculatorNOI CalculatorDSCR CalculatorLTV CalculatorLTC CalculatorDebt Yield CalculatorYield Maintenance CalculatorInternal Rate of Return Calculator
About Us
About UsLeadershipTeamContactWe're Hiring
Get financing
Newly Published
Mar 17 at Commercial Real Estate Loans
Top 10 Commercial Real Estate Lenders of 2023
Mar 15 at Commercial Real Estate Loans
Top 4 Refinancing Loans for Industrial Real Estate in 2023
Feb 20 at Commercial Real Estate Loans
How to Set Rent Rates for Your Commercial Property in 2023
Explore the Janover Network
Mar 27 at Multifamily Loans
How to Navigate Multifamily Tax Credits
Mar 27 at Multifamily Loans
Multifamily Minute Reader Reflections: Interest Rate Outlooks
Mar 24 at Multifamily Loans
The Best 3 Multifamily Loans for Affordable Housing in 2023
Was This Article Helpful?
Last updated on Jan 5, 2023
3 min read

Yield Maintenance: Calculator, Alternatives, Important Considerations

Learn what yield maintenance is, how it is determined, and use our helpful tool to assess the yield maintenance of your asset.

Apply for a loan in minutes and get multiple quotes today → Get Quotes

In this article:
  1. What Is Yield Maintenance?
  2. Yield Maintenance Calculator
  3. Yield Maintenance Calculation
  4. What Do I Use for the Treasury Yield?
  5. Key Yield Maintenance Considerations
  6. Lenders and Yield Maintenance 
  7. Borrowers and Yield Maintenance
  8. Yield Maintenance vs. Alternative Prepayment Penalties
  9. Related Questions
  10. Get Financing

What Is Yield Maintenance?

Yield maintenance is a type of prepayment penalty — like defeasance and step-down prepayment — that enables lenders to receive a similar yield from the prepayment of a loan than they would have received through the completion of scheduled payments on the loan. Yield maintenance clauses specifically require that if a borrower is to prepay a loan, they are required to also pay the difference between the interest rate on the loan and the standing market interest rate on the prepaid capital up to the loan’s maturity date as a penalty. In other words, the purpose of yield maintenance is to compensate investors or lenders for the loss of their future interest income that typically occurs when a loan is paid off early.

Yield Maintenance Calculator

Yield Maintenance Calculation

Yield maintenance premium calculations follow this formula:

Yield Maintenance = Present Value of Remaining Payments on the Mortgage x (Interest Rate - Treasury Yield)

What Do I Use for the Treasury Yield?

The Treasury yield is the current Treasury interest rate with the same maturity as your loan. Check the table below for live rates.

Key Yield Maintenance Considerations

Lenders and Yield Maintenance 

A yield maintenance clause is often a common feature for commercial financing of $1 million or more. Yield maintenance is arguably one of the best prepayment penalty options for lenders to protect themselves against lost revenue. Yield maintenance also helps lenders sell commercial loans for securitization — besides the immediate benefits to the lender, yield maintenance clauses typically also guarantee a set percentage of return to the purchasers of the repackaged debt.

Borrowers and Yield Maintenance

Yield maintenance is particularly desirable for borrowers when interest rates are expected to rise — more so when the clause doesn’t specifically stipulate a minimum prepayment fee. The reason for this benefit is that yield maintenance in such a scenario allows a borrower to repay a loan at a present value discount. In addition, the inclusion of a yield maintenance clause typically denotes that the loan is assumable, which can be a highly desirable feature to some borrowers.

Yield Maintenance vs. Alternative Prepayment Penalties

In commercial real estate, lenders typically mitigate prepayment risk through one of three mechanisms: yield maintenance, defeasance, or step-down prepayment. While each of these prepayment penalties is designed to mitigate lender loss, they do so through different methods:

  • Yield maintenance - A simple payment of a penalty fee including the difference between the interest rate on the loan and the standing market rate up to the maturity date of the loan. 

  • Defeasance - A somewhat complex process that involves a strategical swap of the collateral of the loan with interest-yielding financial instruments of similar value. 

  • Graduated or step-down prepayment - A straightforward payment schedule wherein the borrower pays a premium that gradually reduces over a fixed period of time.

Related Questions

What is Yield Maintenance?

Yield maintenance is a type of prepayment penalty that requires the borrower to pay a premium if they refinance or sell the property before a certain date.
Learn more →
In this article:
  1. What Is Yield Maintenance?
  2. Yield Maintenance Calculator
  3. Yield Maintenance Calculation
  4. What Do I Use for the Treasury Yield?
  5. Key Yield Maintenance Considerations
  6. Lenders and Yield Maintenance 
  7. Borrowers and Yield Maintenance
  8. Yield Maintenance vs. Alternative Prepayment Penalties
  9. Related questions
  10. Get Financing

Getting commercial property financing should be easy.⁠ Now it is.

Click below for a free, no obligation quote and to learn more about your loan options.

Get financing →
Janover logo

Commercial Real Estate Loans is a Janover company. Please visit some of our family of sites at: Multifamily Loans, Multifamily Today, Commercial Real Estate Loans, SBA7a Loans, CMBS Loans, Apartment Loans, HUD Loans, HUD 221d4 Loan, HUD 232 Loan, HUD 223f Loan, HUD 223a7 Loan, SBA Express Loans, SBA 504 Loans, and OpportunityZones Help.

Janover Inc.

6401 Congress Ave
Ste 250
Boca Raton FL 33487

hello@commercialrealestate.loans

Commercial Real Estate Loans

Eligible Property Types
Mortgage Rates
Commercial Loan Calculator
Glossary

Site Information

Privacy Policy
Terms of Use

This website is owned by a private company that offers business advice, information and other services related to multifamily, commercial real estate, and business financing. We have no affiliation with any government agency and are not a lender. We are a technology company that uses software and experience to bring lenders and borrowers together. By using this website, you agree to our use of cookies, our Terms of Use and our Privacy Policy. We use cookies to provide you with a great experience and to help our website run effectively.

Freddie Mac® and Optigo® are registered trademarks of Freddie Mac. Fannie Mae® is a registered trademark of Fannie Mae. We are not affiliated with the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), Freddie Mac or Fannie Mae.

Copyright © 2023 Janover Inc. All rights reserved.