Costs
Prepayment Penalty
A fee some lenders charge if you pay off your mortgage early, make extra payments above a certain amount, or refinance within a specified period. Prepayment penalties are less common today than in the past and are prohibited on many loan types, including FHA and VA loans. Always check whether your mortgage includes a prepayment penalty before signing, as it can cost thousands and limit your flexibility.
Why It Matters
Knowing about Prepayment Penalty helps you budget accurately for your home purchase. Many first-time buyers are surprised by costs beyond the purchase price, and understanding each component prevents unwelcome surprises at the closing table.
When planning your homebuying budget, factor in prepayment penalty early in the process. Ask your lender or real estate agent for estimates specific to your situation and location, since these costs can vary significantly.