Prepayment Penalty. By Investopedia Staff. A prepayment penalty is a clause in a mortgage contract stating that a penalty will be assessed if the mortgage is paid down or paid off within a certain time period. The penalty is based on a percentage of the remaining mortgage balance or a certain number of months’ worth of interest.

In this case, watch for a hidden cost known as a prepayment penalty, which is a fee for paying a loan off before the term is up. Not all auto loans.

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United Arab Bank is offering fixed interest rate of 5.99 per cent for five years, but has a prepayment penalty clause of up to two per cent. Craig Plumb, Head of Research, Mena, Jones Lang LaSalle,

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As another way to compensate for prepayment risk (which is a reinvestment risk), a prepayment penalty clause is often included in the loan contract. "Soft" prepayment terms can allow prepayment without penalty if the home is sold. "Hard" prepayment terms do not allow any exceptions without penalty.

The truth is that many clauses in loan documents are negotiable to one. This provision, coupled with a prepayment penalty, may preclude a.

The note included an acceleration clause. note included a prepayment premium, pursuant to which the borrower could prepay the note under certain circumstances with a required “prepayment.

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What is a loan prepayment penalty? The concept may sound strange to anyone who’s struggling to get out of debt.Simply put, a prepayment penalty is a fee that must be paid if you pay off a loan before the loan’s term.That’s right, as unbelievable as it sounds, you can be punished for paying off a loan sooner rather than later.

This will help banks charge a prepayment penalty. It is also possible that banks may stop. Quite a few banks are going to keep the reset clause at 12 months from the date of disbursement. That will.