What is a pre-payment penalty and why would my loan have one?
Most lenders charge pre-payment penalties on loans for damaged credit customers who are considered high risk. This is done so the lender can keep interest rates lower on these types of loans and guarantee their investment by lending to a damaged credit customer. Most prepayment penalties are two to three percent of the loan amount and are typically charged only if you pay off or refinance your mortgage in the first 2 to 3 years.
