What is an Exit Fee?
An exit fee is most often used in a commercial mortgage or loan and its a fee that’s due at the time the loan is paid off, similar to points paid up front, but an exit fee is paid at time of the mortgage or loan is payoff.
Most of the time an exit fee can be flat fee as an example 2% of the loan amount, but sometimes an exit fee can variable and can increase the longer the loan is outstanding for. This is done do incentive the borrower to execute their business plan and pay off the mortgage or loan when they say they are going to. As an 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.