Prepayment Penalty Definition
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A prepayment penalty is a mortgage provision that states that a penalty, or fee, will be assessed to a borrower if an outstanding liability is paid off before a certain time period. lenders typically calculate these fees as a percentage of the outstanding loan balance, the cost of lost interest payments, or as a flat fee.
· A step-down is a one kind of a prepayment penalty on an existing commercial mortgage or other commercial property loan. lenders typically impose a prepayment penalty on all financial products that create a creditor-debtor relationship. As the creditor, the lender relies on the terms of the original loan to predict a return on investment.
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.
What is a Step-Down Prepayment Penalty? A step-down is one kind of a prepayment penalty on an existing commercial mortgage or other commercial property loan.lenders typically impose a prepayment penalty on all financial products that create a creditor-debtor relationship.
Definition of "Prepayment Penalty" Terry Company, Real Estate Agent RE/MAX . A charge imposed by the lender if the borrower pays off the loan early. The charge is usually expressed as a percent of the loan balance at the time of prepayment or a specified number of months’ interest. Some part of.
Define prepayment. prepayment synonyms, prepayment pronunciation, prepayment translation, English dictionary definition of prepayment. tr.v. prepaid , prepaying , prepays To pay or pay for beforehand. prepayment n. Noun 1. prepayment – payment in advance defrayal, defrayment, payment.
Prepayment Penalty. By Investopedia Staff. A prepayment penalty is a clause in a mortgage contract stating that a penalty will be assessed if the mortgage is paid down or paid off within a certain time period. The penalty is based on a percentage of the remaining mortgage balance or a certain number of months’ worth of interest.
In March 2016, the definition of a small creditor was amended to increase. complies with requirements regarding prepayment penalties and points and fees, and (3) does not have negative amortization.