💸 Understanding Prepayment Penalties: Yield Maintenance vs. Defeasance Explained 🏦

Bill Rapp - Commercial & Residential Mortgage Broker

Published on: 21/08/2025

Understanding Prepayment Penalties: Yield Maintenance & Defeasance When investors or borrowers consider refinancing or paying off a commercial loan early, prepayment penalties often come into play. These penalties protect lenders against lost interest revenue, but for borrowers, they can be confusing and expensive if not fully understood. Two of the most common prepayment structures in commercial real estate lending are Yield Maintenance and Defeasance.