Mortgage Prepayment Penalty Calculator

Calculate mortgage prepayment penalty for early payoff or refinancing.
$
%
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

This calculator helps you estimate the mortgage prepayment penalty you might incur if you pay off your mortgage early or refinance it in 2026. Understanding this penalty is crucial for determining the true cost-effectiveness of an early payoff or a new loan, potentially saving you thousands of dollars.

The calculator typically uses one of two methods: a fixed percentage of the outstanding principal balance (e.g., 2% for the first year, 1% for the second) or a 'yield maintenance' formula. The yield maintenance formula calculates the present value of the difference between your current interest rate and a benchmark rate (like the 10-year Treasury yield, which was around 4.5% in early 2026) applied to the remaining payments.

Always review your mortgage contract's specific prepayment penalty clause. A common mistake is assuming no penalty exists, or misinterpreting the penalty period. Be aware that some loans, especially FHA and VA loans, typically do not have prepayment penalties.

Example: Refinancing a Conventional Loan

  1. 1 Input: Original Loan Amount: $300,000, Original Interest Rate: 6.0%, Loan Start Date: January 1, 2025, Desired Payoff Date: June 1, 2026, Prepayment Penalty Clause: 2% of outstanding balance if paid within the first year, 1% within the second year.
  2. 2 Calculation: By June 1, 2026, you're in the second year of your mortgage. Assuming an outstanding balance of $290,000 at that point, the penalty would be 1% of $290,000.
  3. 3 Result: Your estimated prepayment penalty is $2,900.
  4. 4 Context: This $2,900 penalty needs to be factored into your refinancing costs. If the new loan saves you significantly more than this amount over its lifetime, refinancing might still be a good financial decision.

Source: CFPB — Owning a Home · Last updated: April 2026

Frequently Asked Questions

Do mortgages still have prepayment penalties?
Most conventional and government-backed mortgages originated after 2014 do not have prepayment penalties due to the Qualified Mortgage (QM) rules. However, some non-QM loans, jumbo loans, and commercial mortgages still include them. Always check your loan documents.
How is a mortgage prepayment penalty calculated?
Common methods include a percentage of the remaining balance (typically 1-3%), a sliding scale that decreases over time (e.g., 3% in year 1, 2% in year 2, 1% in year 3), or a set number of months of interest.
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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