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PLC    Prepayment Penalties: What Self-Storage Operators Need to
Know Before a Refinance  Continued from page 1  In many ways,
defeasance is similar to yield maintenance, except instead of a
complete payoff, the collateral for the loan is swapped from the
real estate to securities bearing the same cash-flow stream. As
with yield maintenance, as interest rates rise and time passes,
the resulting penalty will decrease. Unlike yield maintenance,
it’s possible in a rising interest-rate environment for
defeasance to become an asset to the borrower. If current rates
are significantly higher than the rate on the loan, the result
may be a payoff amount below the outstanding loan balance.
There will be additional costs to defeasance, as it takes a
specialist to ensure the calculations are done correctly. There
are a number of online tools that estimate the cost of yield
maintenance and defeasance, such as this one:  Should I
Refinance?  Now that you've c