What is a prepayment penalty?

A pre payment penalty would be enforced if you were to pay off your mortgage earlier thatn the term you agreed to. For example, if you got a 15 yr. mortgage but paid it off in 10 years then the PPP would kick in. But those are pretty rare.

AAA A Pre payment penalty is a pre determined fee charged by your lender in the event that you pay off your earlier than agreed.. When a lender gives you a loan, they are need you to make a certain amount of payments, which gives them enough interest to make doing the loan profitable.. if you pay off early, then they lose out on those potential profits, and some lenders will write in a penalty if you pay off early.. Most pre payment penalties will be based on a certain number of months interest.. For example.. if you pay off your loan inside of the first 3 years, they will charge you 6 months of interest as a penalty for pre payment.. If there is a pre payment penalty on a loan, it will be spelled out in the security agreement.. For mortgages, it's the note.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

A pre-payment penalty is a fee charged to homeowners when they pay certain home loans off too fast. Generally speaking, they only applied to non-conforming adjustable loans from years past, and applied (generally) if you paid the loan off in the first two or three years. They usually amounted to a few months worth of interest. Generally speaking, they no longer exist, especially here in Minnesota, as the State has passed additional rules on pre-payment penalties. Click my name to the left for more information, or visit us at www.StPaul-Mortgage.com

PP are usually enforced by private lenders these days