Mortgage Knowledge Base
A redemption penalty is a fee that is charged to a borrower when they pay off their mortgage before the end of the agreed term.
Redemption penalties are typically charged by lenders to compensate for the loss of interest they would have earned if the borrower had continued to make payments on the loan until the end of the product term.
Redemption penalties can be charged as a percentage of the outstanding mortgage balance or as a fixed fee, and the amount of the penalty will depend on the terms of the mortgage and the lender’s policies.
