Prepayment Penalty: What Does It Mean?
A prepayment penalty is a fee some lenders charge if you pay off your mortgage early, whether through refinancing, selling your home, or making large extra payments. These penalties protect lenders from losing expected interest income. They're less common now, especially on conventional loans, but they still exist.
If your loan has one, it typically applies only during the first few years. Before signing, understand whether your loan includes this penalty and how it's calculated. Financial flexibility matters, and you shouldn't be penalized for getting ahead on your debt.
