Mortgage Loan Prepayment Penalty

The prepayment penalty fee is often 80% of six months interest. It can vary, but in our example it is 80% because the lender allows the borrower to pay off 20% of the loan balance each year, so the penalty only hits the borrower for 80%. The six months interest is the interest-only portion.

If your loan will have a pre-payment penalty, take the time to understand the. A ” hard prepayment penalty” is charged regardless of whether the borrower (you).