What Is an Exit Fee?

Being an investor also means understanding every part of your investment. Not only are there often fees to buy into investments, but there can also be fees to exit them. Knowing the amount of these fees -- known as exit fees -- can help you better understand the return to expect on your investment.

Loading paragraph...

Blocks spelling out the word fees and surrounded by percentage signs. — Image source: Getty Images.

Loading image...

Loading paragraph...

Prepayment Penalty

A clause written into a loan contract that allows the bank to charge you an additional fee for paying off your loan early.

Although many commercial real estate loans are structured so that the exit fee is a flat fee regardless of when you pay the loan off, there are situations where it can increase as time goes by as an incentive to pay the loan off more quickly. These fees are often in place of a loan origination fee but also can simply make the commercial loan that much more appealing to investors and banks since the risk of default is often significant.

Related investing topics

Loading paragraph...

How to Research Stocks

Good research can help investors find the best companies to invest in.

What Is the Penalty for Withdrawing a CD Early?

You don't necessarily have to leave your money in a CD for the entire term. But you'll pay for taking it out early.

Accounts That Earn Compounding Interest

Interest compounds when interest payments also earn interest. Learn how to get compounding interest working for your portfolio.

How to Buy Etsy Stock (NASDAQ:ETSY)

Etsy is a leading e-commerce platform for handmade and vintage products. Check out how to invest in Etsy.

Loading hub_pages...

Loading paragraph...

About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

TMFMaldivesBlue

@MaldivesBlues

The Motley Fool has a disclosure policy.