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

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## 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?

**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.

**Next, determine the interest rate of the mortgage.**For this mortgage, the interest rate is a flat 4.5%.

**Next, determine the treasury yield at the time.**In this case, the treasury yield is 2.5%.

**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