Prepayment penalty
A fee some loans charge for paying off the balance early. Most modern conforming mortgages do not have one — always confirm before making large extra payments.
What does prepayment penalty mean?
A prepayment penalty is a fee some loans charge for paying the balance off early, designed to protect the lender expected interest. Most modern conforming mortgages no longer carry one, but it still appears on some non-qualified and older loans. Always confirm it is absent before you make large extra payments or plan to refinance, since the penalty can erase the savings.
Frequently asked
Do most mortgages have a prepayment penalty?
No. Most modern conforming mortgages do not charge one, and federal rules limit them on qualified loans. They still appear on some non-qualified, investor and older loans, so it is worth confirming before you commit.
How do I know if my loan has a prepayment penalty?
It must be disclosed on your loan estimate and closing documents — check the prepayment-penalty line, or ask the lender directly. Always confirm it is absent before making large extra payments or refinancing, since the fee can wipe out the savings.
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