Prepayment Penalty is a fee charged when a loan is paid off before a specified date — at flip exit, refinance, or property sale. Common structures: step-down (5-4-3-2-1, declining 1% per year), step-down to a floor, or a flat percentage. DSCR rental loans commonly carry 3-year and 5-year prepay terms. Fix-and-flip loans frequently waive prepay or carry a 3-6 month minimum interest charge. The penalty math gets compared against the rate or fee savings of an early exit before refinancing.
Costs & Fees