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Mortgage Prepayment Penalty Calculator
Prepayment penalties are rare on residential but common on commercial — quantify before refi or sale.
Penalty amount
$15,000
Penalty applies
Yes
Months until penalty-free
3 yr 6 mo
How the math works
Penalty = balance × penalty %. Applies if within lockout period.
$500k × 3% = $15,000 penalty. 42 months remaining in lockout — penalty applies.
How to Use
- Enter current balance.
- Enter prepayment penalty %.
- Enter months into loan.
- Enter lockout months.
- Enter months remaining penalty.
- Read penalty amount.
Frequently Asked Questions
Prepayment penalty types?
Hard prepay: penalty applies any time before lockout end, no exceptions. Soft prepay: applies only if refi (not sale). Step-down: 5/4/3/2/1% over 5 years (5-year step-down most common). Yield maintenance (commercial CMBS): pays lender lost yield on remaining term, can equal 5–25% of balance. Defeasance (CMBS): substitute Treasury portfolio for collateral, expensive in low-rate environment. Residential: Dodd-Frank limits — prepay penalty rare on conforming, sometimes on jumbo non-QM, ARMs.
How does this debt analysis fit a workout strategy?
Workout, default, and recapitalization decisions depend on the gap between in-place debt and current asset value. Lenders evaluate cure cost, foreclosure timeline + cost, broker price opinion (BPO), and borrower equity. Borrowers evaluate equity in the property, refinance feasibility, and forbearance economics. This calculator provides one input to that multi-factor decision.
Discounted payoff (DPO) vs forbearance vs deed in lieu?
DPO: lender accepts less than full balance to avoid foreclosure cost, common with non-recourse and underwater assets. Forbearance: payment deferral 6–18 months, balance accrues, useful when value will recover. Deed in lieu: borrower transfers title to lender, faster than foreclosure but lender takes full risk. DPO often best when borrower has new capital + lender wants quick exit.
Special servicing dynamics?
CMBS loans transfer to special servicer at default or maturity default. Special servicer compensation aligns with workout, but timeline is 6–24 months and fees stack ($25–250k+ in costs). Whole-loan and balance-sheet lenders move faster but with less flexibility. Bridge and debt fund lenders most flexible. Time-to-resolution and total friction cost should be weighted in any borrower scenario.
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