How does PrecisionLender account for prepayment penalties?
- It's difficult to determine if, or when, a borrower may choose to prepay their loan
- PrecisionLender provides the option of adjusting your Target ROE, if you choose, to reflect that a loan with prepayment protection holds less risk since the "downside" of an early payoff has been reduced.
- You can also add a prepayment rate to indicate the rate, expressed as a percentage, of the year balance that is anticipated to be paid off on top of the normal amortization. This will affect your loan's ROE.
If your system administrators have chosen to utilize this feature, then you will see a “Prepayment Option” field on the Opportunity Screen.