What Are These Penalties?
Yield Maintenance (YM) requires the borrower to pay the lender the present value of the "lost yield" — the difference between the note rate and what the lender can now earn by reinvesting in Treasuries. It's a cash payment at payoff.
Defeasance substitutes a portfolio of Treasury securities that replicates the remaining loan cash flows. The loan technically stays outstanding — but the collateral is now T-bonds, freeing the real estate.
When They Bite
Both penalties balloon when rates have fallen since loan origination — because the lender's reinvestment yield is below the note rate. In today's 4-5% Treasury environment, loans originated at sub-4% rates in 2020-2021 face severe penalties.
Pair with Refinance Analyzer and CMBS Sizer to model the net economics of refi-now vs hold-to-maturity.
Rate & Lending DisclosureInterest rates, loan terms, leverage levels, and pricing references shown on this page are estimates only, based on current Florida commercial real estate market conditions and lender feedback as of the page's last update. They are
not commitments to lend, are not loan approvals or pre-qualifications, and do not guarantee any specific loan terms or that financing will be available to any particular borrower or property. Actual interest rates, fees, leverage, amortization, prepayment terms, and other loan terms depend on borrower qualifications (credit, net worth, liquidity, experience), property characteristics, lender-specific underwriting requirements, third-party reports, and market conditions at the time of application. All loans are subject to lender credit approval, underwriting, and applicable federal, state, and local lending regulations. Linton Global Solutions is a Florida-licensed commercial real estate brokerage (FL Broker #BK703722); it is
not a lender. Financing is sourced through third-party lender relationships, and final loan terms are determined by the originating lender. This page does not constitute consumer credit advertising under Federal Reserve Board
Regulation Z (12 CFR Part 1026) and is intended for informational purposes only for commercial real estate professionals, investors, and owners considering commercial mortgage financing. Past loan terms or transactions do not guarantee future results.