Definition of Pre-Payment Penalty:

Pre-Payment Penalty in Orange County:

A fee a lender charges a borrower for paying off their loan early. Since it costs lenders to originate a new loan, the pre-payment penalty is compensation for the borrower retiring the loan early – this could happen by them paying the loan off directly, through refinancing or by selling the home to a buyer. The pre-payment penalty amount is usually based on the remaining mortgage principal balance or a number of month’s worth of interest payments. When a borrower applies for a loan, the Good Faith Estimate provided by the lender will indicate whether the borrower will be subject to a pre-payment penalty and then it is formally stated on the Truth-in-Lending Statement (TIL).


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