Prepayment Penalty Definition

Prepayment Penalty Law and Legal Definition Prepayment penalty is a charge assessed against a borrower who elects to pay off a loan before it is due. It is a fee that a lender may assess if a borrower repays a loan before the scheduled maturity.

com states that a prepayment penalty is considered abusive when a prepayment is not only hidden in fine print, but when a prepayment penalty on the original mortgage (which often equals 5 percent of the original loan) is so high that it eats up any and all equity that a homeowner has built into the house, often leaving him or her owing more money.

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A prepayment penalty is a mortgage provision that states that a penalty, or fee, will be assessed to a borrower if an outstanding liability is paid off before a certain time period.

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Prepayment penalties on subprime mortgages As the interest rate on Federal tax underpayments increases (8% for the calendar quarter beginning July 1,2006), taxpayers facing a tax liability dispute with the IRS are even more likely to consider making voluntary prepayments to obviate the effects of any interest and penalties.

Prepayment 1. The payment of a debt in full before it is due. Prepayment is good for the borrower because it relieves him/her of the debt, but it deprives the lender of interest he/she would have received otherwise. As a result, some lenders attach prepayment penalties to loans to disincentivize.

Prepayment penalty : read the definition of Prepayment penalty and 8,000+ other financial and investing terms in the NASDAQ.com Financial Glossary.

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Prepayment penalty is mostly charged in cases where s/he pays one or more monthly payments before the due date. Prepayment penalty is usually included as a clause in a mortgage agreement. A prepayment penalty that applies to the sale of a home and a refinancing transaction is called a "hard" prepayment penalty.

Why are prepayment penalties necessary in commercial real estate lending?. balance of the existing loan and 2) some pre-defined prepayment penalty.

In addition, the rule would require that loans exempted from risk retention be fully documented, have limits on points and fees and prepayment penalties. because the definition is clear and.