Yield Maintenance Calculator
Estimate the prepayment premium on a commercial or multifamily loan — Fannie Mae, Freddie Mac, life-company, bank or conduit — before you sell or refinance.
How the premium is calculated
- Balance prepaidUnpaid principal at payoff$5,000,000
- Rate gapNote 6.25% − discount rate 4.91% (Treasury)1.34%
- Present-value factor[1 − (1 + r)−60/12] ÷ r, r = 4.91%4.3403
- Yield maintenance$5,000,000 × 1.34% × 4.3403$290,798
- Minimum premium1.00% of the balance$50,000
- Prepayment premiumThe greater of the two · total payoff $5,290,798 plus accrued interest$290,798
Refinancing into a 5.75% loan would save about $25,000 of interest a year, or $125,000 over the 5 years left in the yield maintenance period — less than the $290,798 premium, so refinancing now doesn't pay on rate alone. Yield maintenance is designed to roughly offset this saving, which is why the math is often close.
Paying off a $5,000,000 loan at 6.25% with 5 years left in the yield maintenance period, when the Treasury yield is 4.91%, costs a prepayment premium of about $290,798 (5.82% of the balance) using the Fannie Mae formula. That is the present value of the 1.34% interest-rate gap over the remaining period.
Premium If Treasury Yields Move
The premium is set by the Treasury yield about 25 business days before payoff, so a move in rates before then changes what you owe.
| Treasury yield | Premium | % of balance | What applies |
|---|---|---|---|
| 3.91% | $522,183 | 10.44% | Yield maintenance |
| 4.41% | $404,893 | 8.10% | Yield maintenance |
| 4.91% now | $290,798 | 5.82% | Yield maintenance |
| 5.41% | $179,795 | 3.60% | Yield maintenance |
| 5.91% | $71,786 | 1.44% | Yield maintenance |
Premium If You Pay Off Later
| Pay off | Time left | Premium | Extra interest while waiting* |
|---|---|---|---|
| Now | 5 years | $290,798 | $0 |
| In 6 months | 4 years 6 months | $267,819 | $12,500 |
| In 1 year | 4 years | $243,576 | $25,000 |
| In 2 years | 3 years | $191,164 | $50,000 |
| In 3 years | 2 years | $138,046 | $75,000 |
*Interest you keep paying at your note rate instead of the new loan rate. The premium falls as the yield maintenance period runs down, but waiting has its own cost — and Treasury yields will change in the meantime.
Yield Maintenance Methods Compared
| Method | Premium | How it works |
|---|---|---|
| Fannie Mae note formula | $290,798 | Annual discounting of the rate gap |
| Monthly present value | $296,512 | Monthly interest differential discounted at the Treasury rate ÷ 12 |
| Step-down (5-4-3-2-1) | $250,000 | 5% of the balance with 5 years left on the schedule |
The Fannie Mae multifamily note sets the premium at the greater of 1% of the amount prepaid or the amount prepaid × (note rate − Treasury yield) × [1 − (1 + r)−n/12] ÷ r, where r is the yield on a specified Treasury security and n is the months to the end of the yield maintenance period. Other lenders discount monthly, use a spread over Treasuries, or calculate on the amortizing balance. Your note controls — read the prepayment section or ask the servicer for a payoff quote.
Key Answers About Yield Maintenance
Yield maintenance is a prepayment premium that gives the lender the interest it would have earned if you had kept the loan, minus what it can earn by reinvesting your payoff in Treasuries. On your loan that works out to $290,798 before the minimum, and $290,798 after it.
Take the gap between your note rate and the Treasury yield (1.34%), multiply by the balance ($5,000,000), and multiply by a present-value factor for the 5 years left (4.3403). The result, $290,798, is compared with the 1.00% minimum ($50,000), and you pay the larger amount.
Higher Treasury yields shrink the premium because the lender can reinvest at a better rate. A half-point rise in the Treasury yield would cut yours from $290,798 to about $179,795. If Treasury yields rise above your note rate, only the minimum is owed.
Defeasance — replacing the loan collateral with a portfolio of Treasuries that makes the remaining payments — is common on CMBS loans and usually costs about the same as yield maintenance plus legal and servicing fees. A step-down schedule (often 5-4-3-2-1% by year) is easier to predict; on your loan it would currently be $250,000. Some lenders also allow a buyer to assume the loan, which avoids the premium entirely.
Before You Prepay
Ask your lender whether the buyer can assume the loan — an assumption usually costs a fee of about 1% but avoids the prepayment premium, and a below-market rate can make the property easier to sell. If you're planning a 1031 exchange, build the premium into your numbers early.
Most notes require written notice 30 days or more before prepayment and charge interest through the end of the month, so payoff on the last day of a month is often cheapest. Many loans also have an open window in the final months before maturity with no premium at all.
This calculator estimates the premium. The binding amount comes from your servicer's payoff statement, which uses the exact Treasury security, pricing date and formula in your note. Have an attorney or loan broker review it before closing.
Treasury Yields Used (as of October 15, 2026)
| Maturity | Yield |
|---|---|
| 3-month | 4.28% |
| 6-month | 4.35% |
| 1-year | 4.49% |
| 2-year | 4.77% |
| 3-year | 4.85% |
| 5-year | 4.91% |
| 7-year | 5.00% |
| 10-year | 5.10% |
| 20-year | 5.48% |
| 30-year | 5.43% |
Constant-maturity Treasury yields from the Federal Reserve's H.15 release. For terms in between, the calculator interpolates in a straight line between the two nearest maturities.
Estimates for planning only — not legal, tax or lending advice. Actual prepayment premiums depend on the exact terms of your loan documents, the specific Treasury security and pricing date your lender uses, and any fees. Always rely on your servicer's payoff statement.
Key sources: Fannie Mae Multifamily Note, Schedule A (Prepayment Premium) · Federal Reserve H.15 Selected Interest Rates