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What is a mortgage prepayment penalty and is it generally advisable to get a mortgage that has one? |
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A Prepayment penalty on a Mortgage allows the
Lender to charge a Borrower additional Interest, typically six months worth,
when a mortgage is repaid during the penalty period, which is usually somewhere
in the first three to five years of the mortgage. If a mortgage does have a
Prepayment penalty, this is clearly stated within the mortgage disclosures,
mortgage Note or prepayment penalty rider to the note. The advantage of taking
a mortgage with a prepayment penalty is that it could carry a lower rate of
interest or you may be permitted to take a mortgage without paying for non-recurring Closing Costs.
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