Enter the present value of remaining payments on a mortgage, the interest rate, and the treasury yield to determine the yield maintenance.

## Yield Maintenance Formula

The following formula is used to calculate yield maintenance.

YM = PVMP * ((IR/100) - (TY/100))
• Where PVMP is the present value of all remaining mortgage payments on the loan ($) • IR is the interest rate of the loan (%) • TY is the treasury yield (%) The present value of all remaining mortgage payments can further be broken down into the formula: PVMP = (1-(1+r)^(-n/12))/r * B • Where r is the interest rate • n is the number of months remaining • B is the balance on the loan ## Yield Maintenance Definition What is yield maintenance? Yield maintenance is a type of prepayment penalty that investors attain to yield the same amount as if the borrower made all scheduled interest payments up until the maturity date. ## Example Problem How to calculate yield maintenance? 1. First, determine the present value of all remaining mortgage payments. For this example, the present value of the remaining payments is found to be$250,000.00.

2. Next, determine the interest rate of the mortgage.

For this mortgage, the interest rate is a flat 4.5%.

3. Next, determine the treasury yield at the time.

In this case, the treasury yield is 2.5%.

4. Finally, calculate the yield maintenance.

Using the formal above, the yield maintenance is found to be:
YM = PVMP * ((IR/100) – (TY/100))
YM = $250,000* ((4.5/100) – (2.5/100)) YM =$5,000.00