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What are prepayment penalties?

April 26, 2017penalties prepayment

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What are prepayment penalties?

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Some mortgages include a prepayment penalty if a loan is paid off before a certain time. The purpose is to insure the lender gets reimbursed for any upfront concessions they may have offered the borrower.

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A penalty fee charged for paying off mortgage early, thus allowing banks to still make money off of the loan in the event that you inherit a small fortune. Most loans these days do not have prepayment penalties – and if they do, they are only applicable for the first few years of the loan.