Prepayment Premium Calculator

Prepay premiums deter early payoff.

Loan balance

Year of payoff

Year 1 penalty %

Prepay premium

$240,000

Penalty % this year

0.0%

If waited 1 year

$160,000

How the math works

Penalty = year 1 % − (year − 1) × 1% stepdown. Premium = balance × penalty.

Year 3 penalty: 5 − 2 = 3%. $8M × 3% = $240k. Wait 1 year: 2% = $160k. Saves $80k.

How to Use

Enter loan balance.
Enter year of payoff.
Enter step-down schedule.
Read prepay premium.

Frequently Asked Questions

Step-down schedule?

Agency multifamily: 5/4/3/2/1 (5% year 1, 4% year 2, etc., open in year 6+). Bank: 3/2/1/0 (3-year declining). CMBS: typically defeasance or YM. Bridge: 1-3% fixed or small step-down. Conduit: 'no prepay' often.

Economics?

Step-down designed to recover lender's expected yield. Year-1 prepay most expensive; later years cheaper. Factored into refi decisions — sometimes defer 6-12 months to step down materially.

Open period?

Some loans allow open prepay in last 90-180 days before maturity (no penalty). Allows smooth takeout without YM/defeasance. Plan refi during open period when possible.

How does this affect my portfolio-level metrics?

Single-asset impact rarely matters in isolation for a portfolio of 20+ assets, but systematic patterns do. If the same issue shows up across 10% of your portfolio, the aggregate impact is meaningful. Track this metric at the portfolio level quarterly. Institutional operators aggregate these monthly into a KPI dashboard for investors and lenders.