A prepayment penalty is when the borrower pays off the loan early, commonly during the first five years of the loan; because of the early payment the borrower will be responsible for paying an additional amount of money, typically about six months interest on 80% of the mortgage balance. Sub-prime market loans will typically carry prepayment penalties more than standard mortgage loans.
Amount
The typical prepayment penalty is 6 months' interest on 80% of the balance. (For a rough estimate, multiply the monthly payment by 5.)
Length Penalty is in Affect
The typical prepayment penalty is in effect for the first five years of the loan
MORE MORTGAGE & LOAN ARTICLES...
- THE LOAN PROCESS
- WHAT IS THE TYPICAL PREPAYMENT PENALTY AMOUNT?
- WHAT ARE THE BENEFITS OF A DEBT CONSOLIDATION LOAN?
- WHAT ARE ALTERNATIVE INCOME DOCUMENT LOANS?
- HOW TO REDUCE YOUR MONTHLY MORTGAGE LOAN PAYMENTS
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