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


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | 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