Prepayment Penalty
/ˌpriːˈpeɪmənt ˈpɛnəlti/
Definitions
- (n.) A fee charged by a lender if a borrower pays off a loan before its scheduled maturity date.
The borrower faced a substantial prepayment penalty for settling the mortgage early.
Forms
- prepayment penalty
- prepayment penalties
Related terms
See also
Commentary
Prepayment penalties are often included to compensate lenders for lost interest; drafters should clearly define trigger events and calculation methods.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.