Prepayment Penalty Definition

On December 4, 2017 the term loan agreement was amended to restate the definition of "total fixed charges. plus accrued unpaid interest thereon to the prepayment date, plus an applicable prepayment.

A prepayment penalty is a fee that lenders charge to borrowers who pay off loans "early." Loans like auto loans and home loans are typically scheduled to last for a certain number of years (known as the term), with the loan balance reaching zero at the end of the term.

A soft prepayment penalty allows a borrower to sell their home at anytime without penalty, but if they choose to refinance the mortgage, they will be subject to the prepayment penalty. A hard prepayment penalty, on the other hand, sticks the borrower with a penalty if they sell their home OR refinance their mortgage. Obviously, this is the.

A prepayment penalty clause in a mortgage contract states that a penalty will be assessed if the loan is paid down or paid off within a certain.

If flipping is your goal, then look for loans that do not require a prepayment penalty. Also, flippers are likely ahead with higher rates and lower points because, by definition, they want short-term.

It is meant to compensate the lender for not realizing the anticipated interest income and for the possibility of reinvesting the loan amount at a lower interest rate. prepayment penalty is usually equivalent to three months of interest on the loan. Also called breakage cost. You Also Might Like.

Define prepayment. prepayment synonyms, prepayment pronunciation, prepayment translation, English dictionary definition of prepayment. tr.v. prepaid , prepaying , prepays To pay or pay for beforehand. prepayment n. Noun 1. prepayment – payment in advance defrayal, defrayment, payment.

A prepayment penalty is a fee for paying off a loan "too early." See how these penalties work and how to avoid paying extra charges.

Definition of PREPAYMENT PENALTY: A penalty imposed on the borrower for the complete settlement of the loan before the expected payoff date. It is means of compensation for the lender as The Law Dictionary Featuring Black’s Law Dictionary Free Online Legal Dictionary 2nd Ed.

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