[Arct1k]

The reason normally for the fees is that the bank has hedged the interest rate risk on the loan for its duration or possibly even sold the interest payments as a derivative to a third party e.g. Pension fund.

When you terminate the loan it creates a significant knock on effect as any interest rate hedge needs to altered and the person who bought the cash flows will no longer get what they expected and hence charge the bank.

It also depends on the mortgage - additional payments can go directly against the mortgage. The bank will always have a preference to pay down unsecured debt first (for obvious reasons) but this should actually align with the your objectives. Unsecured debt is always much more expensive than secured debt.