A charge from your lender if you pay off your mortgage early, make extra payments beyond your privileges, or refinance before the term ends.
For variable rate mortgages, the penalty is typically three months of interest. For fixed rate mortgages, it is the greater of three months interest OR the Interest Rate Differential (IRD). The IRD calculation varies significantly between lenders and can result in penalties of $10,000 to $30,000+ on a fixed rate mortgage. Some lenders use more borrower-friendly IRD calculations than others, and this should be a factor in choosing your mortgage product.
Related terms: Mortgage Refinancing | Fixed Rate Mortgage