Most often used in commercial real estate as the pre-payment requirement on Life Insurance Company and Agency loans,
Yield Maintenance is the process of releasing a commercial property from the lien of the mortgage by effectively paying the lender all remaining interest on the loan, at a present value discount.
Consequently, defeasance is more expensive than
yield maintenance.
The Addendum to the note deals with such matters as prepayments,
yield maintenance and exculpation.
The loan is interest only and can be prepaid subject to
yield maintenance after 18 months.
The loan is secured by an indirect pledge of the equity ownership in 339 facilities located in 30 states, is pre-payable at any time subject to
yield maintenance during the first twelve months, and is mandatorily pre-payable in January 2012 unless the borrower satisfies certain financial conditions.
The fixed-rate loans have a seven-year term with five years of
yield maintenance.
The loan is interest only and can be prepaid subject to
yield maintenance during the first five years and with set fees the following five years.
5 years interest only,
yield maintenance of seven years, and a 30-year amortizing schedule.
While properties that have freely prepay-able mortgages have been actively refinancing their mortgages, more and more owners of multifamily and healthcare properties are paying sometimes large prepayment penalties--often in the form of defeasance or
Yield Maintenance payments --for the sake of locking in today's low rates for the longest term possible.
Class II-A-4 will have the benefit of a
yield maintenance agreement provided by Swiss Re Financial Products Corp.
For instance, well-heeled borrowers in New Jersey are now much more willing to pay a
yield maintenance penalty--essentially a form of pre-payment penalty.
5 years of
yield maintenance, and a 30year amortization schedule payable on an actual/360 basis.
