Yield Maintenance Prepayment Penalty Calculator

What is a yield-maintenance prepayment penalty?

Yield maintenance is a prepayment fee that borrowers pay lenders to reimburse them for the loss of interest resulting from the prepayment of a loan. This provision permits the lender to obtain the same yield as if the borrower had made all scheduled mortgage payments until loan maturity. It is important to note that if the current market rate or ‘equivalent yield of remaining term treasury’ is higher than the original interest rate the prepayment penalty usually decreases to zero in which case Lenders will usually have a clause that will trigger a 1% minimum prepayment fee. Many investors choose Yield Maintenance when they feel that interest rates will rise as it can offer substantial savings over other options like defeasance or declining prepayment penalties.