Yield Maintenance

DEFINITION of 'Yield Maintenance'

A prepayment premium that allows investors to attain the same yield as if the borrower made all scheduled mortgage payments until maturity.

BREAKING DOWN 'Yield Maintenance'

Yield maintenance premiums are designed to make investors indifferent to prepayment. Furthermore, It also makes refinancing unattractive and uneconomical to borrowers.

RELATED TERMS
  1. Prepayment

    The satisfaction of a debt or installment payment before its ...
  2. Prepayment Penalty

    A clause in a mortgage contract that says if the mortgage is ...
  3. Refinancing Risk

    1. The risk that an early unscheduled repayment of principal ...
  4. Prepayment Model

    A model used to estimate the level of prepayments on a loan portfolio ...
  5. Contraction Risk

    The risk faced by the holder of a fixed income security when ...
  6. Single Monthly Mortality - SMM

    In mortgage-backed securities (MBSs), this is the percentage ...
Related Articles
  1. Managing Wealth

    The Risks Of Mortgage-Backed Securities

    Find out how weighted average life guards against prepayment risk.
  2. Markets

    Best 3 Mortgage Calculator Websites for Canadian Residents

    Understand the key features of Canadian mortgages, and discover a few of the best online mortgage calculators for Canadian home loans.
  3. Trading

    Defeasance Reduces Commercial Real Estate Fees

    Try this alternative to short-term variable-rate financing when using leverage to buy property.
  4. Investing

    Subprime Is Often Subpar

    Proceed with caution when considering these short-term, high-interest mortgages.
  5. Markets

    Why Are U.S. Companies Borrowing in Euros?

    U.S. companies with operations that need funding in Europe are likely to take advantage of lower European borrowing rates.
  6. Investing

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  7. Markets

    How Do I Calculate Yield To Maturity Of A Zero Coupon Bond?

    Yield to maturity is a basic investing concept used by investors to compare bonds of different coupons and times until maturity.
  8. Personal Finance

    Mortgage Basics: The Amortization Schedule

    By Lisa SmithThe amortization schedule for a residential mortgage is a table that provides a breakdown of the schedule of payments from the loan's first required payment to the loan's final payment. ...
  9. Personal Finance

    Top 6 Mortgage Mistakes

    These common errors could end in foreclosure.
  10. Markets

    Bond Yields: Current Yield And YTM

    A bond's current yield, also called "bond yield," is the interest it pays annually divided by the bond's price. A stock's current yield, also called "dividend yield," is the sum of its annual ...
RELATED FAQS
  1. Do prepayments provide working capital?

    Learn how prepayments for various services such as insurance, rent and supplies are included as part of a company's current ... Read Answer >>
  2. Do FHA loans have prepayment penalties?

    Learn whether FHA loans have prepayment penalties, and find out the rules governing interest charges when prepaying your ... Read Answer >>
  3. What is the difference between yield to maturity and the yield to call?

    Determining various the various yields that callable bonds can provide investors is an important factor in the bond purchasing ... Read Answer >>
  4. What are the different formations of yield curves?

    Find out more about the yield curve and yield curve formations, what yield curves measure and the three main types of yield ... Read Answer >>
  5. What is the difference between the yield of stock and the yield of a bond?

    Explore and understand the various meanings of the investment term "yield" as it is applied to equity investments and bond ... Read Answer >>
  6. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center