Yield Maintenance Penalty

Penalty Another form of Prepayment Penalty on commercial mortgage loans. Yield Maintenance provisions require the borrower prepaying a loan to also pay an amount that would give the lender the same return on the loan as if it were held to maturity. Essentially, the lender will be paid the difference, if any, between the interest rate on the loan and the current market rates the lender would receive if it loaned the money at the time of prepayment. If rates are higher when the loan is prepaid there may be little or no prepayment penalty, conversely the lower the rates at the time of prepayment, the greater the penalty.