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Prepayment Penalty

Prepayment Penalty

A fee that lenders may charge when borrowers pay off their mortgages early, either in full or in part. This penalty is typically a percentage of the outstanding balance and can be significant, depending on the terms of the loan. Some lenders impose prepayment penalties to protect themselves from losing out on the interest they would have earned had the borrower kept the mortgage for its full term. However, not all mortgages come with prepayment penalties, so it's important for homeowners to read the fine print and understand their loan terms before signing on the dotted line. While prepayment penalties may seem like an unfair burden for homeowners who want to pay off their mortgages early and save on interest, some borrowers may find that the savings from prepaying their mortgages outweigh the cost of the penalty. Ultimately, whether or not to prepay a mortgage early is a personal decision that each homeowner should make based on their individual financial situation and goals.
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