What Is a Prepayment Penalty in New Hampshire Real Estate?
- Jim Johnson
- 3 days ago
- 2 min read
🏡 What Is a Prepayment Penalty in New Hampshire Real Estate?
When purchasing a home in New Hampshire, you may come across the term prepayment penalty in your mortgage documents. While most standard loans no longer use them, certain loan types still charge a penalty if you pay off your mortgage earlier than expected.
Here’s what NH buyers need to know.
⭐ What Is a Prepayment Penalty?
A prepayment penalty is a fee that some lenders charge if you:
✔ Pay off your loan early
✔ Refinance before a certain period
✔ Make large extra principal payments
Lenders include these penalties to make up for the interest they lose when a borrower pays off a loan too soon.
⭐ Are Prepayment Penalties Common in NH?
Most traditional mortgage programs do NOT include them, such as:
✔ Conventional loans
✔ FHA loans
✔ VA loans
However, they can appear in:
✔ Investment property loans
✔ Non-QM mortgage programs
✔ Portfolio loans
✔ Certain higher-risk or specialized loan products
Always confirm your loan terms before closing.
⭐ Types of Prepayment Penalties
1. Hard Prepayment Penalty
Applies whether you sell the home or refinance.
2. Soft Prepayment Penalty
Only applies if you refinance, not if you sell.
3. Step-Down Penalty
The fee decreases each year.
Example:
Year 1: 3%
Year 2: 2%
Year 3: 1%
⭐ How Much Can a Prepayment Penalty Cost?
Penalty structures vary by lender, but common forms include:
✔ 1%–3% of the remaining loan balance
✔ Six months of interest
✔ A decreasing multi-year scale
The exact terms must be disclosed by your lender.
⭐ How NH Homebuyers Can Avoid Prepayment Penalties
✔ Choose mainstream loan programs
✔ Ask your lender up front if one exists
✔ Review the Loan Estimate and Closing Disclosure carefully
✔ Avoid certain non-traditional lending products
If a penalty exists, the lender must disclose it clearly.
⭐ Bottom Line
Prepayment penalties aren’t common in typical New Hampshire home purchases, but they do exist in certain loan types—especially investment or specialty financing.
Understanding whether your loan includes one can help you avoid surprise fees if you refinance or pay off your loan early.
Jim Johnson — Real Estate Agent
58 NH Route 25A
Wentworth, NH 03282
P: (857) 249-7392
Licensed New Hampshire REALTOR® with Three Hills Real Estate Services
Broker Email: info@ThreeHillsRES.com
Broker Website: www.ThreeHillsRES.com
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