Defeasance Calculator

Have you guys used sites like DefeaseWithEase.com to come up with prepay estimates? Are they close? I'm working with a client right now that I'm in the trenches with. Short of ordering payoffs, we're trying to get an idea of his penalties so that we can make some decisions.

 

All you have to do is email the address to info@astdefeasance or call (866)-DEFEASE and they send you a complete (free) package. You'd be surprised at the mistakes you can make on the online calculators.

 

Waterstone Defeasance - John Felter has a great product and helps to save you money in the way the securities are held for defeasance, and the fees and spread you pay. As you may you the rate of the securities in the interpolated rate and it not entirely accurate. I know typical companies and banks pocket the difference, but Waterstone passes these savings on to you.

I've used defease with ease and gives you a pretty good and accurate estimate.

I've also used M&T's model, pretty good too.

 

It's fairly easy to build your own model (and have full transparency).
- Build an excel schedule with the debt service payments, including the final payoff - Find a yield curve for the required collateral (usually treasuries) I'm new here and can't post links, but you can get these from the Treasury web site or from brokers, lenders, etc who work with them. - Discount each payment back with the corresponding bond

For example, the payment due one year from now would be PVd back to today at 0.64%.

With the current rate curve, you are essentially prepaying all future payments. There isn't much of a discount. You can get pretty close just by summing up all future payments.

Build it once, and amaze your friends.

 

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