That means that there are no additional charges to the borrower for paying all or part of the loan off early.
Typically with prepayment penaties, the penalty kicks in if the borrower pays more than for example 20% off in a given year prior to the end of the penalty period (2 years, 3 years, 5 years)
As far as your $2400 then $1000/mo over a 12 mo period on a 1200/mo payment. You would want to run that by your individual lender. The difficulty could be how they apply interest paid and principal reduction applied. You would want to make certain that they applied the 1st $2400 payment so the deficient $1000 payments would not be reflected as deliquent or non payment of the $200 difference
When you make your arragements with your lender, get those arrangements in writing on their letter head and signed and dated, then keep it with your important papers
Best of luck