Prepayment penalty
A fee charged if you pay off the loan early — either through a full payoff (refinance or sale) or, on some products, through accelerated principal payments. Rare on conventional and FHA loans. Some non-QM products include a 1–3 year prepayment penalty structured as a declining percentage. Ask explicitly before signing a non-QM note, especially if you plan to refinance into conventional within a few years.
How does this affect your loan? Estimate self-employed qualifying income with the DTI calculator, or read the self-employed mortgage guide.
Related terms
- APR (Annual Percentage Rate) — The total cost of a loan including the interest rate, origination fees, discount points, and other lender char…
- Rate lock — A lender commitment to hold a specific interest rate for a set period (typically 30–60 days) while your loan i…
- Points / discount points — Upfront fees paid to the lender to buy down the interest rate. 1 point = 1% of the loan amount. On a $400,000…
- Origination fee — The lender’s fee for processing and underwriting the loan. Typically 0.5–1% on conventional loans; 1–2% on non…
- MIP (Mortgage Insurance Premium) — FHA’s mortgage insurance charge. Consists of an upfront MIP (1.75% of the loan, typically financed into the ba…
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Sources
Educational definition only — not financial, legal, or tax advice. Programs and limits change; verify current terms with a licensed professional.