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Mortgage

Prepayment Penalty

Definition

A fee charged for paying off a loan before a specified date, common on commercial and some investor loans.

Example

The DSCR loan carried a 5-4-3-2-1 declining prepayment penalty over five years.

Frequently asked questions

What does Prepayment Penalty mean in real estate?

A fee charged for paying off a loan before a specified date, common on commercial and some investor loans.

How is Prepayment Penalty used in practice?

The DSCR loan carried a 5-4-3-2-1 declining prepayment penalty over five years.

This definition is provided for educational purposes. Legal and tax terminology can carry jurisdiction-specific meaning — confirm with a licensed professional before relying on it in a transaction.