Prepayment Penalty Clause

• Category: Contracts - Clauses
• State: Multi-State
• Control #: US-C-CL-590-1
• Format: Word; Rich Text

Description

A clause dictates the conditions under which the contract is legally enforceable and determines the terms of the contract. Contracts often contain boilerplate clauses or standard clauses found across most contracts. These standard clauses do not require a lot of negotiation. Included is a Sample Prepayment Penalty Clauses for a Contract for Real Property. This is a penalty that is imposed upon the borrower if they attempt to make a mortgage payment before the date or time period stated in the contract. While it may seem like mortgage lenders would prefer an early payment, in some cases the lender may actually lose profit if the mortgage is paid off too quickly. Prepayment Penalty Clauses: Contract for Real Property, also known as prepayment clauses, are legal clauses included in contracts for the sale or loan of real property that require a borrower or buyer to pay an additional fee if they pay off the loan or purchase agreement earlier than the specified time. These clauses can be used to discourage buyers from taking out a loan they may not be able to repay, or to recover interest that the lender would have received if the agreement had been fulfilled. There are two main types of Prepayment Penalty Clauses: Contract for Real Property: fixed-rate and adjustable-rate clauses. Fixed-rate clauses require the borrower to pay a set sum, usually a percentage of the loan amount, if they pay off the loan before the end of the agreed term. This fee may be calculated as a percentage of the original loan amount or as a flat fee. Adjustable-rate clauses require the borrower to pay an additional fee if they pay off the loan before the end of the agreed term, and the amount of the fee varies depending on the changes in interest rates. This type of clause is usually used in mortgages to protect the lender from losses if interest rates go up during the term of the loan.

Prepayment Penalty Clauses: Contract for Real Property, also known as prepayment clauses, are legal clauses included in contracts for the sale or loan of real property that require a borrower or buyer to pay an additional fee if they pay off the loan or purchase agreement earlier than the specified time. These clauses can be used to discourage buyers from taking out a loan they may not be able to repay, or to recover interest that the lender would have received if the agreement had been fulfilled. There are two main types of Prepayment Penalty Clauses: Contract for Real Property: fixed-rate and adjustable-rate clauses. Fixed-rate clauses require the borrower to pay a set sum, usually a percentage of the loan amount, if they pay off the loan before the end of the agreed term. This fee may be calculated as a percentage of the original loan amount or as a flat fee. Adjustable-rate clauses require the borrower to pay an additional fee if they pay off the loan before the end of the agreed term, and the amount of the fee varies depending on the changes in interest rates. This type of clause is usually used in mortgages to protect the lender from losses if interest rates go up during the term of the loan.