Prepayment Penalty
A fee some loans charge if you pay off your mortgage early or pay down principal faster than allowed.
In plain English
A prepayment penalty is a fee charged by some mortgages if you pay off the loan — through a sale, refinance, or large extra payments — within a certain number of years. Most conventional mortgages today don't include one, but it's worth confirming.
Always check your loan estimate and closing disclosure for a prepayment penalty clause before signing, especially if you might sell or refinance in the next few years.
Where you'll run into it
Guides and tools on TheBuyingPath that cover prepayment penalty in context.
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