Mortgage Prepayment Penalty Calculator

Calculate mortgage prepayment penalty for early payoff or refinancing.

By Konstantin Iakovlev · Updated September 2026 · Source: 12 CFR 1026.43(g) — Regulation Z limits on prepayment penalties

$
%
Penalty Type

Penalty Amount

$3,437.50

Per Month Equivalent

$14.32

Penalty Details

Calculation Method3 Months Interest
Remaining Balance$250,000.00
Penalty Amount$3,437.50

Use the Mortgage Prepayment Penalty Calculator above to calculate your results. Enter your values and see instant results — all calculations run in your browser.

Disclaimer: This calculator is for informational purposes only and does not constitute tax, financial, or legal advice. Results are estimates based on the information you provide and current rates. Always consult a qualified tax professional or financial advisor for advice specific to your situation.

How It Works

Paying off a mortgage early or refinancing can trigger a prepayment penalty, and estimating that charge upfront tells you whether the move actually saves money. The figure can run into thousands of dollars, which is enough to change whether an early payoff or a new loan makes financial sense at all.

The calculator offers three ways a penalty clause can be written: a flat percentage of the balance you pay off, often tiered, such as 2% in the first year and 1% in the second; three months' interest at your current rate; and an interest-rate differential, the gap between your rate and a comparison rate applied to the balance for the months remaining. On a consumer home loan, federal rules cap the charge whatever the formula: under Regulation Z (12 CFR 1026.43(g)), a prepayment penalty is allowed only on a fixed-rate qualified mortgage that is not a higher-priced loan, it can't exceed 2% of the balance prepaid in the first two years or 1% in the third year, and it can't apply after three years.

Your mortgage contract spells out the exact prepayment clause, so read it closely before assuming anything. Borrowers often guess that no penalty applies or misjudge how long the penalty period lasts, both of which can prove costly. Certain loans, FHA and VA among them, generally carry no prepayment penalty at all, which is worth confirming for your own note.

Example: Refinancing a Conventional Loan

  1. 1 Input: Original loan $300,000 at 6.0% for 30 years, closed January 1, 2025, with the first payment due February 1, 2025. You plan to pay it off on June 1, 2026. Penalty clause: 2% of the balance prepaid in the first year, 1% in the second.
  2. 2 Balance: after the 16 monthly payments of $1,798.65 made from February 2025 through May 2026, the balance is $295,038.13. June 1, 2026 is 17 months after closing, in the loan's second year, so the 1% tier applies.
  3. 3 In the calculator: enter $295,038.13 as the remaining balance and 344 months remaining, choose Flat % and enter 1. Penalty = $295,038.13 × 1% = $2,950.38, or $8.58 per remaining month.
  4. 4 Context: A 1% charge in the second year is within the federal cap for a consumer mortgage (2% during the first two years). Add the $2,950.38 to the new loan's closing costs before working out whether the refinance pays off.

Source: 12 CFR 1026.43(g) — Regulation Z limits on prepayment penalties · Last updated: September 2026

Frequently Asked Questions

Do mortgages still have prepayment penalties?
Some do, within tight limits. Under Regulation Z, a consumer mortgage can carry a prepayment penalty only if it is a fixed-rate qualified mortgage that is not higher-priced; the penalty can't apply after three years, and a lender that offers one must also offer you a comparable loan without it. Loans made primarily for business purposes, such as many investor and commercial mortgages, fall outside these rules. Always check your loan documents.
How is a mortgage prepayment penalty calculated?
Common methods include a percentage of the balance paid off, a sliding scale that steps down over time, or a set number of months of interest. On a consumer home loan, federal rules cap any of them at 2% of the balance prepaid in the first two years and 1% in the third year, with no penalty after that.
Is it worth paying the penalty to refinance?
Compare the prepayment penalty cost to the total interest savings from refinancing over your expected remaining time in the home. If you will recoup the penalty in 2-3 years of lower payments, refinancing is likely worthwhile.

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