Prepayment Penalty
Also called: early repayment charge, prepayment charge
A prepayment penalty charges you for repaying a loan early, because early repayment costs the lender the interest it expected. It's typically a percentage of the balance or a set number of months' interest, often only during the first few years. Regulated US mortgages have largely eliminated them; commercial loans, some auto and personal loans, and many non-US mortgages have not. Check for one before making extra payments or refinancing, since it can wipe out the entire saving.