Prepayment Penalty Calculator for Investor Loans

A fee charged if the loan pays off — through sale or refinance — inside a defined window. Business-purpose investor loans commonly use a step-down such as 5/4/3/2/1, meaning 5% in year one falling to 1% in year five.

The applicable percentage is multiplied by a balance basis defined in the note — usually the outstanding balance at payoff, sometimes the original loan amount. This tool lets you choose the basis so you can model both.

Often yes. Programs typically price a shorter penalty term or no penalty with a rate or points adjustment. Compare the buy-out cost to the penalty you would actually pay at your planned exit year.

It depends on the note. Some investor notes waive the penalty on a bona fide sale to an unrelated party and enforce it only on a refinance. Read the prepayment rider before assuming either way.

Enforceability and limits vary by state and by whether the loan is business-purpose. Program availability and terms differ accordingly; a licensed loan officer can confirm what applies to your scenario.

It means the penalty percentage drops each year the loan is in force: 5% of the balance basis in year one, 4% in year two, and so on down to 1% in year five before disappearing. On a $300,000 payoff balance, a year-two payoff at 4% would cost roughly $12,000.

Not automatically — programs often charge a rate or fee premium for a shorter penalty term or none at all, so a 3-year step-down might cost more upfront than a 5-year one. Compare the pricing trade-off against your realistic hold period before choosing.

Rarely by default; most notes apply the penalty regardless of which lender the new loan comes from unless the note specifically carves out an in-house refinance exception. Read the prepayment rider rather than assuming a waiver.

Yield maintenance charges a penalty tied to the lender's lost interest income relative to current rates, which can be far larger than a fixed step-down percentage, especially when rates have fallen since closing. Step-down penalties are simpler and generally more predictable for investors to plan around.

It depends on the note — some programs only penalize a full payoff, while others apply the penalty to partial curtailments above a stated annual threshold, commonly 20%. Check the specific note language before making a large extra principal payment.

Ask the loan officer for the exact step-down schedule and balance basis in writing before signing disclosures, then run your planned exit year through this calculator to see the estimated dollar cost. Comparing that cost against a shorter-penalty option's pricing adjustment helps you pick the better structure.

The term length and whether one applies at all are often chosen from a menu of pricing options rather than fixed, so you may be able to select a shorter term or none in exchange for a pricing adjustment. Ask what options the program offers rather than assuming the initial quote is the only one available.