Yield Maintenance

(redirected from Yield Maintenances)

Yield Maintenance

The extra money a prepaying borrower would have to pay to make the yield the same for the lender if the borrower made all, regularly scheduled payments until maturity. When a borrower prepays a loan or other debt investment, the lender loses the interest the borrower otherwise would have paid. The lender may charge the yield maintenance as a prepayment penalty to ensure that it makes the yield regardless of whether or not the borrower prepays. This has the effect of making prepayment or refinancing unattractive to the borrower.