Explore the Mortgage101 Library
Check Local Mortgage Rates
Loan Program Choices
Use our calculator to find out your estimated monthly payment in advance: Enter the loan amount, interest rate, and length of mortgage.
Try our Mortgage Payment Calculator
Prepayment penalties are often included with mortgage loans and other types of loans. With this type of penalty, you are going to have to pay a certain amount of money if you pay off the loan early. In many cases, you will also have to pay a fee whenever you pay more than a certain percentage of the principal of the loan. For example, if you pay more than $10,000 towards the principal of your mortgage in any given year, you are going to have to pay a prepayment penalty.
Prepayment penalties can vary greatly depending on the size of the loan. Typically, the penalty will be expressed as a percentage of the value of the loan. For example, you might have to pay 3 percent of the loan as a prepayment penalty if you were to pay off your loan before the maturation date.
This type of penalty is designed to keep you from eliminating the interest that you pay your lender. If you are in a mortgage with a prepayment penalty, it could affect your decision to sell the property or refinance.
- FHA Eligibility with Bankruptcy and Foreclosure
- Should You Refinance? Make Sure the Timing is Right
- 3 Factors that Can Negatively Affect Your Mortgage Application
- Second Mortgages: Advantages and Disadvantages
- Low Down Payment Loan Qualification
- How to Get Approved for an FHA Loan despite Bad Credit
- Appraisal Basics
- What To Do When Mortgages Default
- Short Selling a Rental Property