The Make-Whole or Prepayment Penalty Ratio represents the additional cost payable by a borrower when repaying a property development finance loan before its agreed maturity. Lenders use this ratio to calculate compensation for the interest income they would have received had the loan continued to term. The ratio aligns the early repayment charge with the lender’s original return expectations, protecting profitability and pricing structures. For UK property developers, understanding this ratio is vital when modelling project cash flow, refinancing strategies, or evaluating the true cost of capital within development finance structures.
This sits beneath Financing Fees & Upfront Costs, introducing a more specific variant of the measure without changing its core interpretation. It is commonly considered alongside Break Cost Risk (Early Repayment Charges), as both are closely related measures used to assess similar aspects of performance or risk.
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