[systemtest]

They are specified in the contract. If you sign the mortgage contract you are giving the bank steady business for the next 10 years in return of a lower rate. By breaking that 10 year agreement the bank loses money which they will charge you for.

[Dylan16807]

If the early payment penalty is based on the current rate, then it's not what I mean when I say "specified by the contract".

[kgwgk]

It all depends on the contract. You can get a not-so-low rate that gives you the option of prepayment (with some fixed penalty).