Finance
A Connecticut borrower wants to pay off their 30-year mortgage in 20 years by making extra principal payments. The effect will be:
AThe interest rate increases because the lender loses interest income
BThe total interest paid over the life of the loan decreases significantly✓ Correct
CThe monthly payment decreases automatically after extra payments
DThe lender may impose a prepayment penalty under federal law
Explanation
Making extra principal payments reduces the outstanding balance faster, which means less interest accrues over time. Paying off a 30-year mortgage in 20 years can save tens of thousands of dollars in interest—a significant financial benefit.
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