Respuesta :
She is not nearly as happy when she reads the fine print on the contract, which permits her lender to charge her EXTRA interest just for paying off the loan early. This is known as: A prepayment penalty.
What Is a Prepayment Penalty?
A prepayment penalty is usually specified in a clause in a mortgage contract stating that a penalty will be assessed if the borrower significantly pays down or pays off the mortgage before term, usually within the first three years of committing to the loan.
The penalty is sometimes based on a percentage of the remaining mortgage balance, or it can be a certain number of months’ worth of interest. Prepayment penalties protect the lender against the financial loss of interest income that would otherwise have been paid over time.
A prepayment penalty that applies to both the sale of a home and a refinancing transaction is called a “hard” prepayment penalty. A prepayment penalty that applies to refinancing only is referred to as a “soft” one.
Therefore, we can conclude that the correct option is B.
Your question is incomplete, but most probably your full question was:
When Chloe Armstrong pays off the 30-year conventional loan on her Oceanside home in less than 20 years, she is thrilled. However, she is not nearly as happy when she reads the fine print on the contract, which permits her lender to charge her EXTRA interest just for paying off the loan early. This is known as:
A. Subrogation.
B. A prepayment penalty.
C. A subordination clause.
D. An acceleration clause.
Learn more about Prepayment Penalty on:
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