Step-Down Clause

Step-Down Prepayment Penalties on Commercial Property Loans

Step-Down Prepayment Penalties on Commercial Property Loans

Generally, this is a straightforward calculation based on the remaining balance. It is called a "step-down" penalty because the amount gets smaller the longer the loan is in place.For example, a typical step-down might be 5 % of the outstanding balance in the first year, 4 % in the second year, 3 % in the third year, and so on.