Finance
An Alaska lender charges a 'prepayment penalty' on a mortgage. This penalty is imposed when:
AThe borrower fails to make payments on time
BThe borrower pays off the loan earlier than scheduled✓ Correct
CThe borrower refinances into a higher-rate loan
DThe borrower misses an escrow payment
Explanation
A prepayment penalty is a fee charged when a borrower pays off all or a specified portion of the loan before a certain date. Lenders may charge prepayment penalties to recoup interest income they expected from the full loan term. Many loan programs, including most FHA and VA loans, prohibit prepayment penalties.
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