Finance
What does it mean when a mortgage has a 'prepayment penalty'?
AThe borrower must pay the loan early
BThe borrower must pay a fee if the loan is paid off before a certain date✓ Correct
CThe lender can demand full repayment at any time
DExtra payments are not allowed
Explanation
A prepayment penalty is a fee charged to borrowers who pay off their loan (or make substantial extra payments) before a specified date. California has restrictions on prepayment penalties, particularly for consumer mortgages.
Related California Finance Questions
- Discount points paid on a mortgage loan are best described as:
- What is the debt-to-income (DTI) ratio and how is it used?
- California's anti-deficiency statutes generally protect borrowers in which foreclosure scenario?
- What is 'equity' in real estate?
- What type of loan is guaranteed by the Department of Veterans Affairs?
- California is primarily a 'lien theory' or 'title theory' state for mortgages?
- What is the purpose of RESPA (Real Estate Settlement Procedures Act)?
- What is a HELOC?
Practice More California Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free California Quiz →