A prepayment penalty, also known as prepay, is a common term between a bank and a lender. It is a penalty fee that a Credit Partner charges if a borrower pays off their mortgage ahead of the pre-agreed schedule.
Prepayment penalties act as a safeguard for lenders against losing interest income. This helps reimburse lenders for the time, effort, and possible rate changes associated with reallocating their loaning money.
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