A penalty enacted by a mortgage lender in the event that a large portion or all of a mortgage note is paid off. A Hard Prepayment penalty is enacted if the borrower purchases or refinances their property.

It differs from a Soft Prepayment Penalty in that you are penalized whether you pay your note off through a sale or a refinance. Whereas a Soft Prepay only penalizes you in the event of your note being paid off through a refinance.