⚠️ Educational estimate only. Actual defeasance costs depend on live Treasury quotes, specific loan documents, and a defeasance consultant. Consult your servicer for an official quote.
📌 Quick Answer: Defeasance cost = Treasury Portfolio + Third-Party Fees. The Treasury portfolio replicates your remaining loan payments using government securities. When Treasury yields are below your loan rate, the portfolio costs more than the balance (premium). When yields are above your rate, it can cost less. Fees typically run $60,000–$150,000+ [citation:6][citation:12].
📋 Key Takeaways — Defeasance 2026
Defeasance replaces property collateral with Treasury securities [citation:10]
Loan stays in place; property is released from lien [citation:12]
Treasury portfolio is the largest cost component [citation:4]
No 1% floor — unlike yield maintenance [citation:6]
Often cheaper than yield maintenance when Treasury > Loan Rate [citation:6]
Process takes 30–90 days [citation:12]
ℹ️ This defeasance calculator uses simplified Treasury pricing logic. It estimates the cost of substituting Treasury securities for your property collateral, plus third-party fees [citation:4].
💡 Important: Defeasance has no floor. If Treasury yields exceed your loan rate, the portfolio may cost less than par, resulting in a negative premium (savings) before fees [citation:6].
📊 Defeasance Cost Components (2026)
Component
Typical Cost
Notes
Treasury Portfolio
Varies with rate spread
Largest cost; depends on loan rate vs Treasury yield [citation:4]
Servicer Processing Fee
$25,000–$50,000
Loan servicer defeasance processing [citation:4]
Legal Fees
$25,000–$75,000
Borrower and lender counsel [citation:4]
Accounting Fees
$5,000–$15,000
CPA review [citation:4]
Rating Agency Fees
$0–$25,000
If required by CMBS deal [citation:4]
Successor Borrower / Consultant
$8,000–$15,000+
Entity creation and defeasance consultant [citation:2]
Source: Fannie Mae, CRED iQ, CDCalculators 2026 estimates [citation:2][citation:4]. Fees vary by loan complexity and servicer.
🏢 Example 1: Rate Spread 1.5%
Loan: $5,000,000 | Rate: 5.5%
Treasury: 4.0% | Months: 48
Treasury Portfolio: ~$5,270,000
Fees: ~$100,000 | Total: ~$5,370,000
Premium: ~$270,000 (5.4%)
🏢 Example 2: Rising Rate (Treasury > Loan)
Loan: $5,000,000 | Rate: 3.5%
Treasury: 5.0% | Months: 48
Treasury Portfolio: ~$4,750,000
Fees: ~$100,000 | Total: ~$4,850,000
Premium: -$150,000 (savings before fees)
How the Defeasance Calculator Works
This defeasance calculator 2026 estimates the cost of prepaying a CMBS or agency commercial mortgage by substituting Treasury securities for the property collateral. Defeasance is the standard exit mechanism for securitized loans after their lockout period [citation:10][citation:12].
The formula has two components: the Treasury portfolio cost (the price of government securities that replicate your remaining loan payments) and third-party fees (servicer, legal, accounting, rating agency). The total is the cash required at closing [citation:4].
For a $5M loan at 5.5% with 48 months remaining and a 4.0% Treasury yield, the portfolio costs approximately $5.27M, plus ~$100K in fees, for a total of ~$5.37M — a premium of about $270K over the balance [citation:4].
Defeasance vs. Yield Maintenance
Both are prepayment penalties, but they work differently [citation:6][citation:10]:
Yield Maintenance: Borrower pays a cash premium calculated as the present value of the rate differential. Has a 1% floor in most loans [citation:3].
Defeasance: Borrower purchases Treasury securities. No floor — if Treasury yields exceed the loan rate, the portfolio may cost less than par, resulting in a negative premium [citation:6].
Defeasance is often cheaper when Treasury yields are higher than the loan rate. Yield maintenance is often cheaper for short remaining terms (under 3 years), where defeasance's fixed fees dominate [citation:6][citation:12].
Real Defeasance Example (2022)
A $46.1 million CMBS loan (Blue Diamond Crossing) defeased in March 2022. The Treasury portfolio cost $48.3 million, and third-party fees totaled $97,000 — including servicer processing ($25K), legal ($22K), rating agency ($17.5K), consultant ($15K), and successor borrower ($8K). Total cost: $48.4 million, about 5% above the outstanding balance [citation:2].
This illustrates the scale: fees alone can exceed $100K, and the Treasury premium (the difference between portfolio cost and loan balance) is the dominant cost when rates have fallen since origination.
Why Timing Matters
Defeasance cost swings with Treasury yields. If you defease when rates are rising, the portfolio costs less (higher yields mean you need fewer securities to generate the same cash flow). If rates are falling, the portfolio costs more [citation:10].
This calculator lets you adjust the Treasury yield to model different rate environments. In practice, a defeasance consultant can model cost at future dates to identify the optimal window [citation:13].
🇺🇸 Quick Reference — Defeasance 2026
Factor
2026 Detail
Treasury portfolio
Largest cost; rate-spread driven [citation:4]
Third-party fees
$60K–$150K+ [citation:6][citation:12]
Floor
None (unlike yield maintenance's 1%) [citation:6]
Process time
30–90 days [citation:12]
Common loan types
CMBS, Fannie Mae, Freddie Mac [citation:10]
❓ Frequently Asked Questions
What is defeasance in commercial real estate?
Defeasance is a prepayment mechanism where a borrower replaces the property collateral with a portfolio of U.S. Treasury securities that generate cash flows matching the remaining loan payments. The loan stays in place until maturity, but the property is released from the lien [citation:10][citation:12].
How much does defeasance cost in 2026?
Total defeasance cost includes the Treasury portfolio (the largest component, driven by the spread between your loan rate and Treasury yields) plus third-party fees typically ranging from $60,000 to $150,000+. A 2022 CMBS defeasance example showed $97,000 in third-party fees alone [citation:2][citation:6].
When is defeasance cheaper than yield maintenance?
Defeasance is often cheaper when Treasury yields are higher than your loan rate, because the replacement securities can be purchased at a discount. Yield maintenance has a 1% floor, while defeasance has no floor. For short remaining terms, yield maintenance may be cheaper due to defeasance's fixed fees [citation:6][citation:10].
The defeasance process typically takes 30 to 90 days from start to finish, depending on the complexity of the loan and the speed of the securities purchase and documentation [citation:12].
💡 Expert Tips for Defeasance
Tip #1: Model both defeasance and yield maintenance before deciding. The cheaper option depends on the rate environment and remaining term [citation:6].
Tip #2: Negotiate "favorable defeasance provisions" at loan origination. The ability to use agency securities (Fannie/Freddie) instead of Treasuries can reduce cost [citation:6].
Tip #3: Defeasance often only needs to run to the open prepayment window, not to final maturity. This shortens the portfolio and cuts cost [citation:12].
Tip #4: Time your defeasance. Rising rates make the Treasury portfolio cheaper. Falling rates make it more expensive [citation:10].
Tip #5: Request an official quote from your servicer. This calculator is an estimate, not a binding number.
🏢 Need to Estimate Your Defeasance Cost?
Get a 2026 estimate in 30 seconds. Treasury portfolio + third-party fees.
🛡️ CDCalculators defeasance calculator 2026 — data sources: Fannie Mae Defeasance Calculator, CRED iQ CMBS analysis, Chatham Financial, J.P. Morgan, CRELYTIC. Last updated October 28, 2026. Disclaimer: Educational estimate only. Actual defeasance costs depend on live Treasury quotes, specific loan documents, and a defeasance consultant. Consult your servicer for an official quote. Not financial advice.