Calculate prepayment penalty for real estate investments and properties
Enter loan amount, penalty percentage or months of interest, and when you plan to prepay. The calculator shows penalty costs.
A $750,000 commercial loan with 3% declining penalty (3%, 2%, 1% over 3 years) costs $22,500 if paid off in year 1.
To protect their expected interest income, especially on commercial loans. They priced the loan expecting to collect interest for full term.
Penalty equal to present value of remaining payments at current Treasury rate. Ensures lender receives promised yield if you prepay.
Instead of paying penalty, you purchase Treasury bonds that replicate remaining loan payments. Complex but may be cheaper than yield maintenance.