Refinance Penalty
What does it mean
A Refinance Penalty is a penalty incurred if a loan is paid off prior to maturity through a refinance to another bank.
Why does it matter
Some customers do not like the idea of a prepayment penalty because they don’t like the inability to pay more if they were to have an extra profitable year, and one of the most used reasons why a bank would put a prepayment penalty in place is to discourage the loan being refinanced out of the bank. In this scenario, a Refinance Penalty works great because the customer still has the ability to prepay their loan early, but the bank still gets the refinance protection that it is looking for.
Other Relevant Terms
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Greetings! I'm Clay Sharkey, and there is nothing I like more than assisting others in achieving their goals. I firmly believe that by enhancing a banker's understanding of their customer's' business, they can provide superior service. This superior service, in turn, leads to stronger relationships for the bank, improved performance for the businesses, and better experiences for our communities. Win-win-win.
