Yield maintenance on a CMBS loan, read from the loan agreement

Yield maintenance is the premium you pay to prepay a CMBS loan early so the bondholders receive the interest they expected. A common definition is the greater of 1% of the amount prepaid and the present value of the gap between your note rate and the matching Treasury yield, for every remaining month to maturity (1010 Pacific Street loan agreement, October 2025).

That one sentence hides three choices your loan agreement makes: the floor, the Treasury rate, and the end date. Each changes the number. To estimate yours, enter your terms in the yield maintenance calculator, which uses the Treasury curve pulled live.

The formula, as one recent agreement writes it

The definitions below are from Section 1.1 of the loan agreement dated October 1, 2025 between 1010 Pacific Owner LLC and Citi Real Estate Funding Inc. and Morgan Stanley Bank, N.A., filed with the SEC by Clipper Realty. Paraphrased, with the defined terms kept:

• Yield Maintenance Premium is the greater of (a) 1% of the amount prepaid, or (b) the present value, on the prepayment date, of the “Calculated Payments” from that date through the Stated Maturity Date, discounted at the “Discount Rate”.
• Calculated Payments are monthly interest-only payments on the amount prepaid at a rate equal to the note rate minus the Yield Maintenance Treasury Rate, if that difference is above zero.
• Discount Rate is the monthly-compounded equivalent of the Yield Maintenance Treasury Rate, which is quoted semi-annually.
• Yield Maintenance Treasury Rate is the yield the lender interpolates from Federal Reserve Statistical Release H.15, “U.S. Government Securities/Treasury Constant Maturities”, for the week ending before the prepayment, using the maturities on either side of the Stated Maturity Date. The lender’s calculation is “conclusive absent manifest error.”

In plain terms: take the rate cushion you are giving up (your coupon over the Treasury yield), apply it to the balance you are prepaying for every month left, and discount it back at the Treasury yield. If Treasuries yield more than your coupon, the cushion is zero and the 1% floor applies.

Input	Where it comes from	What moves it
Amount prepaid	Your payoff statement	Amortization to date
Note rate	Your note	Fixed at closing
Treasury yield	H.15, week before prepayment	Daily market moves
Months remaining	Prepayment date to the end date in your definition	How early you prepay
Floor	Your definition (1% here)	Fixed at closing

When yield maintenance applies, and when it does not

Yield maintenance is one of four prepayment structures, and many loans move through several over their life. In BANK5 2025-5YR14, an April 2025 conduit deal, 2 loans (10.5% of the pool) were locked out and then prepayable with “the greater of a Yield Maintenance Charge or Prepayment Premium”, 2 loans (7.3%) carried that premium from the start, and 2 loans (6.2%) allowed either the premium or defeasance after a lockout. The rest were lockout-then-defeasance (prospectus, pp. 224-225). The October 2025 Pacific Street agreement does not allow voluntary prepayment at all before its open date; it offers defeasance instead.

You generally owe nothing extra:

• In the open period at the end of the term. In BANK5 2025-5YR14, the open period was 4 to 7 monthly payments long, and 7 payments for 17 of 25 loans (77.8% of the pool) (prospectus, p. 225).
• On a casualty or condemnation prepayment, unless an event of default is continuing (prospectus, p. 223; loan agreement Section 2.7(b)).

You owe more:

• In default. The Pacific Street agreement defines a Default Yield Maintenance Premium as the greater of 5% of the debt prepaid and the regular yield maintenance premium, and makes it part of the debt after an event of default, including on a foreclosure recovery (Sections 1.1 and 2.7(c)). A loan headed toward default is a reason to talk to the servicer early: see special servicing.

Who gets the premium, and who could waive it

Yield maintenance is not a servicer fee. The prospectus says yield maintenance charges and prepayment premiums are allocated to certain classes of certificates under the deal’s waterfall (BANK5 prospectus, “Allocation of Yield Maintenance Charges and Prepayment Premiums”). Because the money belongs to bondholders, the servicers have little room to cut it:

• Under the pooling and servicing agreement, a modification or waiver of any monetary term other than late fees and default interest is a Major Decision (BANK5 2025-5YR14 PSA, 6.08(a)(ii)), which needs the special servicer and, while it holds control, the Directing Certificateholder’s consent.
• The servicers must act for the certificateholders “as a collective whole” under the Servicing Standard (PSA 3.01(a)).
• The prospectus warns that yield maintenance provisions “may not be enforceable in some states and under federal bankruptcy law” (p. 121, risk factors). That is a risk disclosure for investors, not a planning tool for borrowers; ask counsel before relying on it.

Yield maintenance or defeasance?

If your loan offers both, compare them on the same date. Defeasance buys securities to replace the payments; yield maintenance pays a lump sum. When Treasury yields are well above your coupon, the 1% floor can make yield maintenance the cheaper exit; defeasance may cost less than the balance in that case too, but it carries more transaction cost and time. Run both in the defeasance calculator and the yield maintenance calculator, then read how defeasance works for the process.

Before you request a payoff quote

1. Find the prepayment section and the definitions of the premium, the Treasury rate and the open date in your loan agreement.
2. Check where you are in the schedule. Your trust’s prospectus lists each loan’s provisions in Annex A-1, in notation like L(25),D(28),O(7): see prepayment penalties.
3. Give the notice your agreement requires (the Pacific Street agreement asks for at least 30 days for an open-period payoff) and ask the master servicer for a written payoff with the premium broken out.
4. If the premium makes a sale or refinance uneconomic, look at an assumption or waiting for the open period.

If you are refinancing, Janover Capital LLC arranges the new loan; it is an advisor, not a lender. Get a CMBS quote.

This page describes loan documents and offering disclosures. It is not legal advice.

Sources: 1010 Pacific Street loan agreement, October 1, 2025, Sections 1.1 (“Yield Maintenance Premium”, “Default Yield Maintenance Premium”), 2.7; BANK5 2025-5YR14 prospectus, pp. 121, 223-225; BANK5 2025-5YR14 PSA, 3.01(a), 6.08(a)(ii); Federal Reserve H.15 Selected Interest Rates.