Prepayment Penalty Mortgage Law and Legal Definition
Prepayment penalty mortgage is a mortgage that requires a borrower to pay penalty for prepayment, partial payment or for repaying the entire loan within a specified time period. Prepayment penalty is mostly charged in cases where s/he pays one or more monthly payments before the due date. Prepayment penalty is usually included as a clause in a mortgage agreement.
A prepayment penalty that applies to the sale of a home and a refinancing transaction is called a “hard” prepayment penalty. A prepayment penalty that applies to refinancing is called a “soft” prepayment penalty.
The prepayment penalty is usually calculated over the remaining or the outstanding balance at the time of prepayment. Prepayment penalty usually decline in the passage of time.
Legal Definition list
Related Legal Terms
- Adjustable Rate Mortgage
- Adjustable Rate Mortgage Caps
- Adjustable Rate Mortgage Loan
- Alternative Mortgage Instruments (ATI)
- Alternative Mortgage Transaction [Banks & Banking]
- Amortized Mortgage
- Anaconda Mortgage
- Antiterrorism and Effective Death Penalty Act of 1996
- Asset Integrated Mortgage
- Assignment of Mortgage