Prepayment penalties are less common on other types of loans, but it’s possible you’ll encounter them at some point. For instance, certain auto loans come with a prepayment penalty clause. Some personal loans do as well, though many personal loan lenders – like Discover, Wells Fargo and Prosper – specifically advertise that they don’t have these fees.

Image Source: Payoff Your Mortgage Early Some prepayment penalty clauses require that a borrower pay a prepayment penalty when selling the house, while others do not. Look for the prepayment penalty clause within the mortgage paperwork in order to determine all the specifics related to your circumstances should you decide to pay off your mortgage early.

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How Do I Calculate a Prepayment Penalty on a Mortgage? Mortgage holders seeking to pay off the loan principal early may incur a stiff penalty from their lender.

Prepayment penalty shall apply if the loan balance is prepaid in whole (100%) or in part (any prepayment of principal over the normal amortization.) In the example above, the borrower can make partial principal prepayments at any time, but the prepayment is subject to penalty.

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PREPAYMENT PENALTY. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law.

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A prepayment penalty is a provision of your contract with the lender that states that in the event you pay off the loan entirely, you will pay a penalty. Penalties are usually expressed as a percent of the outstanding balance at time of prepayment, or a specified number of months of interest.

prepayment clause. A loan provision allowing the borrower to pay the loan in full before the maturity date without penalty, or to make principal reductions faster than originally envisioned by the parties. consumer mortgages all have prepayment clauses. Large, commercial loans typically prohibit prepayment.

A prepayment penalty is a fee you’ll have to pay if you pay back your loan ahead of the predetermined schedule. If the terms of your loan include a prepayment penalty clause, then you’ll be penalized if you pay off your debt early. Typically, a prepayment penalty fee is a percentage of your loan’s total remaining balance.