This study examines whether the mortgage prepayment charge affects MBS prepayment rate using MBS data issued by the Korea Housing Finance Corporate (KHFC) between 2004 and 2018. The level of prepayment charge or the change of prepayment regulation is likely to the prepayment behavior of mortgage borrowers. Therefore the prepayment charge could affect MBS prepayment rate. Our major findings are as follows. First, we find that the difference between the borrower’s refinancing rate and prepayment charges causes higher conditional prepayment rate (CPR). Second, the CPR is significantly higher for the MBS issued on and after 2012. This result suggests that the systemic change in the prepayment regulation of 2012 could importantly affect borrowers’ prepayment behavior. Last, the MBS issued on and after 2012 shows the negative relationship between the prepayment charges and the CPR. Overall, the prepayment charges is related to the prepayment rate of MBS. Forecasting the mortgage prepayment rate is a critical factor when we estimate the value of MBS. Thus, if the policy authorities take account of the change in the mortgage prepayment regulation, they need to consider this factor when estimating a MBS prepayment rate.