Answers · Rates, LTV & Loan Structure
Can I pay off my land loan early? What is a step-down prepayment penalty?
Most private land loans allow early payoff, but many charge a prepayment penalty — often structured as a step-down, such as 3% of the balance in year one, 2% in year two, 1% in year three, then nothing. Turnrow uses flexible, step-down prepayment so an early exit costs less the longer you hold.
Lenders charge prepayment penalties because originating a loan has fixed costs — underwriting, legal, appraisal review — that get recovered through interest over time. A loan repaid in month four never covers those costs. The penalty is the lender's floor, not a punishment.
The step-down structure is the fairest version for borrowers with uncertain timelines. If your land sells in month 30 of a 36-month term, a 1% step is a rounding error against the deal. Compare that to yield maintenance or fixed lockouts, which can cost several points regardless of timing — read this clause before you sign anything.
If you genuinely expect a fast exit — a flip, an imminent sale, a takeout loan already in motion — say so up front. Lenders can often trade a slightly higher rate for a shorter or waived penalty. That is a negotiation, and it only happens before closing.
The Turnrow angle
Turnrow structures prepayment to step down over the term and will tailor it when you flag a likely early exit at term-sheet stage. Ask before you sign, not after.
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