Prepayment Penalty Definition

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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.

When Are Prepayment Penalties Allowed in New Mortgages? federal law prohibits some mortgages from having prepayment penalties, which are charges for paying off the loan early. For many new mortgages, the lender cannot charge a prepayment penalty – a charge for paying off your mortgage early.

Definition. Soft prepayment penalty requires the borrower to pay a penalty amount when a loan is paid off because the loan is refinanced only. What It Means. Prepayment penalty is not charged if the borrower sells the property. It is only charged if the borrower refinances the loan.

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.

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.

prepayment penalty: A penalty sometimes charged to a borrower who makes a prepayment.

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.

No Doc Mortgage 2018 A no documentation mortgage (No Doc) is granted without supporting evidence of borrower income but on a declaration confirming they can make. updated jun 17, 2018. No-Doc loans fall into the Alt-A category of lending products.

ARI did not receive any pre-payment penalties in connection with these repayments. Beginning with the quarter ended september 30, 2016, ari slightly modified its definition of Operating Earnings to.

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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. A prepayment penalty, also known as a "prepay" in the industry, is an agreement between a borrower and a bank or mortgage lender that regulates what the borrower is allowed to pay off and when.

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