Calculators
Prepayment Penalty Calculator
Estimate a loan prepayment penalty using a step-down percentage, months of interest or a simplified yield maintenance calculation.
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- Nothing uploaded
The tool
Enter your numbers below. Results update as you type, and nothing leaves your browser.
Everything you enter stays on your own machine. Nothing is sent to us or to anyone else, which you can confirm in your browser network tab.
What people use it for
- Deciding whether to refinance or sell early
- Negotiating loan terms
- Estimating payoff for a property sale
- Comparing loan offers
About this tool
What the Prepayment Penalty Calculator does
Commercial and some residential loans charge a fee for paying off early. Step-down penalties charge a percentage of the balance that falls each year; others charge several months of interest; yield maintenance compensates the lender for the interest it loses at today’s lower rates. This calculator estimates each.
Formula
- Step-down: balance × (5% in year 1, 4% in year 2 … 1% in year 5, then 0%)
- Months of interest: balance × rate ÷ 12 × months
- Yield maintenance ≈ present value of (note rate − Treasury yield) × balance over the remaining term
Worked example
Using the starting values in the calculator above:
| Input | Value |
|---|---|
| Loan balance | $1,200,000 |
| Penalty type | Step-down (5-4-3-2-1) |
| Loan year when prepaying | 3 |
| Note rate | 6.5% |
| Months of interest | 6 |
| Treasury yield for remaining term | 4.2% |
| Years remaining on the term | 4 |
| Result | Value |
|---|---|
| Estimated penalty | $36,000 |
| Penalty as share of balance | 3.00% |
| Total payoff | $1,236,000 |
How to read the result
Real yield maintenance formulas follow the exact wording of your loan documents, including the Treasury used and any minimum penalty. Use this as an estimate.
Compare the penalty with the interest saved by refinancing; a large penalty can still be worth paying if rates have dropped enough.
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Questions
Questions about this tool
The things clients actually want to know — costs, timelines, ownership and what happens after launch.
A fee charged for paying off a loan before a set date.
A penalty percentage that falls each year, such as 5% in year one down to 1% in year five.
A penalty that compensates the lender for interest lost when market rates are lower than the loan rate.
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