What is an Exit Fee in a Commercial Mortgage or Loan?
What is an Exit Fee?
An exit fee, a mortgage exit fee, or a loan exit fee is most often used in a commercial mortgage or loan, and it’s a fee that’s due at the time the loan is paid off, similar to points paid upfront, but an exit fee is paid at the time the mortgage or loan is the payoff.
What are Exit Fee Amounts?
Most of the time, an exit fee can be a flat fee, for example, 2% of the loan amount, but sometimes an exit fee can be variable and can increase the longer the loan is outstanding. This incentivizes the borrower to execute their business plan and pay off the mortgage or loan when they say they will.
For example, there can be a 1% exit fee on a commercial mortgage, and if not paid off within 12 months, it goes by .10 basis points every month.
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