Question

Jason purchased his dream home six months ago. after jason received an inheritance from his uncle, he decided to pay off his mortgage. what should he consider before doing this?

Answer 1

Whether or whether he'll be charged a prepayment penalty.

Some loan agreements stipulate a prepayment penalty to make up for the interest that is not paid to the lender when the borrower repays the loan earlier than anticipated.

When you pay off your mortgage debt in full or in part early, some lenders charge you a fee known as a mortgage prepayment penalty. In order to allow loan lenders to collect interest, the penalty rate encourages borrowers to repay their debt slowly over an extended period of time. If you want to avoid prepayment penalties, you can simply wait until they are no longer an issue before paying off or refinancing your loan. Alternately, you could incur higher expenses that are within the parameters of how much of your loan you can repay each year without incurring early repayment penalties.

Learn more about mortgage penalties here:

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