How is each year’s cost worked out?

The balance times that year’s penalty percent. On a 5-4-3-2-1 step-down, year 1 costs 5% of the balance, year 2 costs 4%, and so on down to 1% in year 5.

Why is the balance the same in every year?

To keep the years comparable. A real balance amortizes down, and the note defines exactly what the penalty applies to, so treat these figures as illustrative.

What happens after the penalty period?

No penalty. Enter an exit year past the last penalty year and the cost shows as $0.

Calculator

Prepayment penalty calculator

A prepayment penalty costs the loan balance times the penalty percent for the year you pay off. On a 5-4-3-2-1 step-down, paying off in year 2 costs 4% of the balance, and after year 5 it costs nothing. On a $300,000 balance, a 5% year costs $15,000. Pick the structure in your note, enter the balance and, if you know it, your exit year.

Exit cost = balance × that year’s penalty %

Result

Enter the balance and pick a structure to see the exit cost in each year of the penalty period.

Next step

Check these numbers with a loan officer

These results are only as good as the numbers you enter. A loan officer can run the same property through a lender's own worksheet.

Have readyYour notePayoff balancePlanned sale or refinance date

Have a loan officer check your rental's numbers

Method

Each year of the penalty period carries a percent: a step-down schedule lowers it one point a year, a flat schedule keeps it level. The cost of paying off in a given year is the balance times that year's percent. After the last penalty year the cost is zero.

Cost to exit in a given year = balance × that year’s penalty %

The calculator uses the same formulas as the worked deals in the analyses, so a figure here and the same figure there agree to the cent.

Questions investors ask

How is each year’s cost worked out?
The balance times that year’s penalty percent. On a 5-4-3-2-1 step-down, year 1 costs 5% of the balance, year 2 costs 4%, and so on down to 1% in year 5.
Why is the balance the same in every year?
To keep the years comparable. A real balance amortizes down, and the note defines exactly what the penalty applies to, so treat these figures as illustrative.
What happens after the penalty period?
No penalty. Enter an exit year past the last penalty year and the cost shows as $0.

Other calculators

Calculator
DSCR loan calculator
Divide rent by the full monthly payment (PITIA) for your DSCR, and see what’s left before vacancy, repairs and management.
Calculator
Cash-out calculator
Value times your lender’s maximum LTV, less the payoff and closing costs: the cash a refinance could pay out.