Glossary
Exit fee
Also called: discharge fee, early repayment fee
An exit fee is a charge payable when a loan is repaid, either at maturity or early. Some private loans also include an early repayment fee or a minimum interest period, so repaying sooner does not always reduce the cost as much as expected.
An example
A borrower sells their property sooner than planned and repays a short-term loan early. The lender charges a discharge fee and the balance of a minimum interest period set out in the loan agreement.
Why it matters
Exit and early repayment charges are easy to overlook but can be significant. Ask for every charge that applies on repayment, in writing, before accepting an offer.
Points to check
Read the repayment section of the loan agreement for exit fees, early repayment fees and minimum interest periods. Ask whether any fee applies if you repay part of the loan, such as when individual lots settle. Calculate the cost of repaying on the expected date and on an earlier date, because the saving from early repayment may be smaller than you expect. Ask the lender to confirm all exit costs in writing.
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