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The Hidden Cost of Prepayment Penalties


February 11, 2021

What is a prepayment penalty, and how does someone know if they have a prepayment penalty condition on their loan?

A prepayment penalty is a clause in the mortgage contract that states the lender may assess a penalty if the borrower significantly pays down or pays off the mortgage before the term of the loan.

Typically, prepayment penalties occur during the beginning of the loan and also during a time when interest rate is fixed for a set period. There’s often a section in the signed note that lists the prepayment penalty clauses. That section spells out specifically what the prepayment p...

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