The quick read: Usually yes. Defeasance buys government securities whose payments replace the loan's remaining payments, and yield maintenance discounts the lender's lost interest at a Treasury yield, so higher yields shrink both exit costs. Treasury's daily par yield curve put the 3-year yield at 4.89% and the 10-year at 5.13% on October 21, 2026, against 1.74% and 2.03% on July 1, 2019. An older low-coupon loan may now be cheap to exit. The catch is that a new fixed-rate loan prices off the same curve, so the cheaper exit and the costlier replacement arrive together.
Why do rising Treasury yields lower defeasance and yield maintenance costs?
Rising Treasury yields lower both exit costs because each is priced from Treasury yields: a defeasance deposit buys securities that must cover the loan's remaining payments, and yield maintenance discounts the lender's lost interest at a Treasury yield, so a higher yield means fewer dollars today to replace the same future payments.
Start with what defeasance actually is. Fannie Mae's Multifamily Selling and Servicing Guide (effective September 28, 2026) defines it as a transaction where the property is released from the lien of the security instrument and the lender receives a perfected security interest in substitute collateral and the cash flows from it. Freddie Mac's Multifamily Guide glossary (Guide Bulletin Update 10/20/26) describes the Defeasance Period as the time in the loan documents when the borrower is prohibited from prepaying and may only defease.
The substitute collateral has to produce the loan's scheduled payments. A bond's price falls when its yield rises, so the same stream of future payments costs less to buy when Treasury yields are higher. A May 24, 2022 Commercial Observer report on rising defeasance requests made the same point: with higher Treasury yields, swapping real estate collateral for securities that match the loan's cash flows becomes more economical.
Yield maintenance works through a formula instead of a securities purchase, but the input is the same. Fannie Mae's Guide, Section 213.02, says the loan documents generally require a prepayment premium equal to the greater of 1% of the unpaid principal balance or yield maintenance. Freddie Mac's glossary defines the Yield Rate as the yield on the applicable U.S. Treasury. The premium pays the holder for the gap between the note rate and that yield, so the gap narrows as Treasuries climb and the premium sinks toward its floor.
Some costs do not shrink with yields. The same Commercial Observer report listed the other defeasance expenses: accounting and consulting fees, legal review or rating agency confirmation, custodial fees for the collateral securities, servicer processing costs and costs tied to the successor borrower. Budget them separately; the full cost breakdown walks through each line.
How much can the exit cost fall on an older low-coupon CMBS loan?
On an illustrative $20 million interest-only loan at a 4.25% coupon with 36 monthly payments left before its open date, the securities needed to defease cost about $1.47 million more than the balance at a 1.74% yield, but about $356,000 less than the balance at 4.89%, in our simplified arithmetic.
Every input below is an assumption chosen to show the mechanism, not a quote, a market cost or a real loan. The arithmetic discounts 36 monthly interest payments of $70,833 plus the $20 million balance at the open date at one flat yield, compounded monthly. Two of the yields are real reference points from Treasury's par yield curve: the 3-year yield of 1.74% on July 1, 2019 and of 4.89% on October 21, 2026.
| Illustrative flat Treasury yield | Securities cost (our arithmetic) | Versus the $20,000,000 balance | Exit cost direction | New-loan rate direction |
|---|---|---|---|---|
| Illustrative flat Treasury yield 1.74% (3-year, July 1, 2019) | Securities cost (our arithmetic) About $21,466,000 | Versus the $20,000,000 balance About $1,466,000 above | Exit cost direction Highest | New-loan rate direction Lowest |
| Illustrative flat Treasury yield 3.50% | Securities cost (our arithmetic) About $20,427,000 | Versus the $20,000,000 balance About $427,000 above | Exit cost direction Falling | New-loan rate direction Rising |
| Illustrative flat Treasury yield 4.25% (equal to the coupon) | Securities cost (our arithmetic) $20,000,000 | Versus the $20,000,000 balance Even | Exit cost direction Near the balance | New-loan rate direction Rising |
| Illustrative flat Treasury yield 4.89% (3-year, October 21, 2026) | Securities cost (our arithmetic) About $19,644,000 | Versus the $20,000,000 balance About $356,000 below | Exit cost direction Lower | New-loan rate direction Higher |
| Illustrative flat Treasury yield 5.50% | Securities cost (our arithmetic) About $19,310,000 | Versus the $20,000,000 balance About $690,000 below | Exit cost direction Lowest | New-loan rate direction Highest |
Read the bottom rows with care. In the arithmetic, once the yield sits above the coupon the securities cost less than the balance. A real deposit is built from specific securities for each payment date, priced off a curve rather than one flat yield, and your loan documents set what qualifies, so get a written quote before you count on a number below the balance. Yield maintenance behaves differently at the bottom: under the greater-of-1% structure in Fannie Mae's Section 213.02, the premium on this $20 million balance could never fall below $200,000 (our arithmetic), however high Treasuries go.
Which Treasury yields actually set the defeasance price?
The Treasury yields that set a defeasance price are the ones maturing near each remaining payment date, so a loan with three years left is priced mostly off the 1-year to 3-year part of the curve rather than the 10-year yield in the headlines, and on October 21, 2026 that front end ran from 4.52% to 4.89%.
Treasury's daily par yield curve for October 2026 shows the whole curve sitting far above its July 2019 level:
1-year Treasury, October 21, 2026 (Treasury par yield curve): 4.52%
2-year Treasury, October 21, 2026 (Treasury par yield curve): 4.81%
3-year Treasury, October 21, 2026 (Treasury par yield curve): 4.89%
5-year Treasury, October 21, 2026 (Treasury par yield curve): 4.95%
10-year Treasury, October 21, 2026 (Treasury par yield curve): 5.13%
10-year Treasury, October 15, 2026 (Treasury par yield curve): 5.10%
10-year Treasury, July 1, 2019 (Treasury par yield curve): 2.03%
The price is struck on a specific day, and the process takes weeks. Fannie Mae's Guide, Section 218.03B, says the defeasance close date may be no more than 45 and no fewer than 30 calendar days after the servicer receives the Defeasance Notice, that the servicer estimates the Defeasance Deposit with Fannie Mae's calculator, and that the deposit stays an estimate until Fannie Mae confirms it. The notice also states whether a Fannie Mae debt instrument or U.S. Treasury securities will serve as the substitute collateral. Yields can move inside that window, so the curve on your pricing day matters more than the curve on the day you first ask.
The Federal Open Market Committee held the federal funds target range at 3.75% to 4.00% on October 28, 2026, but the Treasury yields that price a defeasance deposit still move day to day, so re-read the curve on the day your deposit is priced rather than relying on any tape in this article.
Which exit you get also depends on the loan's age. Freddie Mac's Optigo fixed-rate term sheet (4/26) lists yield maintenance until the loan is securitized, then a 2-year lock-out, defeasance thereafter, and no prepayment premium for the final 90 days; it adds that yield maintenance without defeasance is available for securitized loans at an additional cost. Read your own note, because the choice between defeasance and yield maintenance is set there, not by the market.
Does a cheaper exit mean you should refinance now?
A cheaper exit does not by itself justify refinancing now, because the replacement loan prices off the same Treasury curve that shrank the defeasance deposit, so an owner who trades a 4.25% coupon for a new loan near today's rates can give back more in extra interest than the exit saved.
Freddie Mac's fixed-rate term sheet describes its Index Lock as a way to lock the Treasury index, which it calls the most volatile part of the coupon. That is the point: the Treasury component that lowered your exit cost is also the largest moving part of your next rate.
Run the illustrative loan forward. Assume a replacement rate of 6.75%, an assumption for the arithmetic and not a quote. On $20 million, the extra 2.50 points cost $500,000 a year, or $1.5 million over the 36 months left before the old loan's open date. Against that, the exit at a 4.89% yield came in about $356,000 below the balance before fees. Refinancing early just to capture the cheaper exit loses about $1.14 million in this example (our arithmetic).
The math changes in three situations:
- You are selling. The buyer arranges its own financing, so a cheaper exit flows straight into your net proceeds. This is where higher yields help a seller most.
- You need proceeds or a different structure. A cash-out, a renovation budget or a partner buyout can be worth a higher coupon, but price it as a cost, not as a free gain.
- The open date is close anyway. With only months left, the extra interest is small and the refinance risk at maturity is larger.
The rate-wait calculator helps you test whether holding a low coupon beats moving now on your own numbers.
How do you get a CMBS exit and refinance placed with the right lender?
You get a CMBS exit and refinance placed by pricing the defeasance or yield maintenance quote and the replacement loan on the same day's curve, then sending every lender the same package so net proceeds compare cleanly. YieldStack is an AI-native commercial mortgage brokerage that arranges financing for commercial real estate investors.
Brokerage option, listed first. YieldStack's software matches the deal against a catalog of 20,000+ loan programs. Human brokers then structure the request, negotiate for the borrower and carry the transaction toward closing. On a defeasance-driven refinance that coordination matters: the payoff window, the rate lock on the new loan and the closing date have to line up. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
What to send:
- The note and loan agreement pages that set the lock-out, defeasance and yield maintenance terms, plus the open date
- A current payoff or defeasance estimate from the servicer, with its pricing date
- The trailing 12-month operating statement and current rent roll
- Your plan: sale, cash-out refinance or rate-and-term refinance, and the target close date
- Target loan amount, term and the prepayment structure you can accept on the new loan
When the package is ready, send the deal for review. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
The bottom line
Higher Treasury yields usually make a CMBS loan cheaper to defease or prepay, because both exits are priced from Treasury yields and the yields that matter, the 1-year to 3-year part of the curve, sat between 4.52% and 4.89% on October 21, 2026. The replacement loan prices off the same curve, so take the cheaper exit when you are selling or need the proceeds, and price it against the higher coupon when you are not.