Investor Glossary-prepayment penaltyInvestor Glossary-prepayment penaltyInvestor Glossary-prepayment penaltyInvestor Glossary-prepayment penaltyInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Prepayment Penalty

The HTML to link to this page
 

A prepayment penalty is a type of finance charge paid by a borrower for paying off a loan in advance. The prepayment penalty is common with certain mortgage loans, particularly subprime loans. Prepayment penalty terms are not standardized. A prepayment penalty may apply if too much extra principle is paid but not if the loan is paid off in full, or vice versa. Any prepayment penalty provision in a mortgage loan automatically makes that loan a non-conforming loan. The prepayment penalty is lucrative for some lenders. The borrower with poor credit will often take a high interest rate loan with a prepayment penalty if unable to qualify for any other loan. Later, when the borrower's credit improves enough to refinance at a better rate, the prepayment penalty will kick in. For this reason, critics consider the prepayment penalty an abusive or even predatory lending practice.



Rate this prepayment penalty definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: implied volatility, EBITDA, minority interest, VIX, class C shares, 1035 exchange, real GDP, 401a, labor relations, per diem, required rate of return, reverse mortgage, stock market close, inflation, LIBOR, margin rate, 144a, debt service coverage, diluted share, in escrow, dividends payable, retained earnings, option premium, Key Rate Duration, quality assurance, FTSE, liquidity ratio, irrevocable trust, command economy, deferred revenue, wholly-owned subsidiary, cancelled check, covered put, average price per share, APR, Zero Cost Collar, 1031 exchange, current ratio, FICO score, balance sheet, annual return, stock split, deferred tax, ex-dividend date, phantom income, ex-dividend, open position, risk management, limit order


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use