Mortgage Penalty Calculator
Calculate prepayment penalties and determine if paying off your mortgage early makes financial sense. Analyze refinancing scenarios despite penalties.
How it works
Calculates prepayment penalties using various methods and analyzes whether paying the penalty for refinancing makes financial sense based on interest savings.
Example
$400K balance, 3% penalty = $12K penalty. Refinance from 7% to 5% saves $667/month. Breakeven in 18 months.
FAQ
When should I pay a mortgage penalty to refinance?
When the long-term savings from a lower interest rate exceed the penalty cost. Generally, if your breakeven period is less than 2-3 years and you plan to stay in the home.
How are mortgage prepayment penalties calculated?
Common methods include: percentage of outstanding balance (1-5%), six months interest, yield maintenance (difference between current rate and treasury rate), or fixed dollar amounts.
What types of loans have prepayment penalties?
Commercial mortgages, some portfolio loans, and certain conventional loans. FHA, VA, and most conforming loans don't have prepayment penalties.
Do prepayment penalties decrease over time?
Many loans have step-down penalties that decrease annually (e.g., 5% year 1, 3% year 2, 1% year 3, then none). Check your loan documents for specific terms.
Can I avoid prepayment penalties?
Some loans allow penalty-free prepayment up to 20% annually. Others waive penalties for assumption, sale, or specific hardship situations. Review your loan terms carefully.