Prepayment Penalty

Some lenders levy a fee known as a prepayment penalty if you pay off all or a portion of your mortgage early. You would have consented to this when you signed on to your property if there was a prepayment penalty. Prepayment penalties are not present in all mortgages.

Typically, a prepayment penalty only occurs if you pay off the whole mortgage sum within a predetermined number of years, such as when you sell your house or refinance your mortgage (usually three or five years).

If you pay off a significant portion of your mortgage all at once, there may, in some situations, be a prepayment penalty. If you pay extra principal on your mortgage in tiny amounts at a time, prepayment penalties typically do not apply. However, double-verifying with the lender is always a good idea.