How to Calculate Commercial Mortgage Penalties

During this era, in which subprime mortgages are common, prepayment penalties are common. Some prime loan lenders also have prepayment mortgage fees as well. While most commercial loans carry some kind of prepayment penalties, they may not be present on first mortgage loans for homes that closed in 2008 or 2009.

1. Look
   through your mortgage papers for your promissory note. Your
   promissory note is the contract stating you have a loan out on the
   house. The note will detail the amount of the loan, payments, how
   long the loan is to last and how the prepayment penalty works and
   the dates that the penalty is forced.


2. Call
   your lender to obtain the balance on the date in which you plan to
   pay off the loan. Read the note to see how your prepayment penalty
   is assessed. One common penalty is the equivalent of six months of
   interest based on the balance of the payoff date. To get the figure,
   multiply the balance by the interest rate. This gives you the amount
   of a full year's of interest. Divide that number by two, which gives
   you a half year interest payment amount


3. Another
   common penalty is known as the 3/2/1, which is a descending penalty.
   This penalty is described as paying 3 percent of the balance on the
   payoff date, 2 percent of the balance in the second year and 1
   percent in the third year.


4. Use
   the balance and multiply it by 3 percent if paying loan off in the
   first years. Multiple by 2 percent if paying it off in the second
   year, and by one percent if paying off in year three.


5. There
   are other types of less common prepayment penalties, but the 3/2/1
   and the six month interest payment are the most common. You can ask
   your lender about other penalties and fees associated with your
   commercial mortgage.