What is a mortgage prepayment
penalty and is it generally advisable to get a mortgage that has one?
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.