What is a prepayment penalty?
You may be penalized if you pay off the loan prior to the end of a set term. Some mortgages do have a prepayment penalty, but most do not. It is most commonly found in the “No Cost” loans being offered, where the lender is looking for their profit to come in the form of a higher rate over a period of time.
You may be penalized if you pay off the loan prior to the end of a set term. Some mortgages do have a prepayment penalty, but most do not. It is most commonly found in the “No Cost” loans being offered, where the lender is looking for their profit to come in the form of a higher rate over a period of time.
This is a fee that a borrower must pay when a loan is paid off early: typically either a percentage of the amount prepaid or a number of months interest on the amount prepaid. Not all loans have prepayment penalties. Penalties are not allowed on FHA or VA loans. A loan with a prepayment penalty may have a lower interest rate.
