Finance
A Connecticut buyer's mortgage includes a 'prepayment penalty' that expires after 3 years. The buyer wants to refinance in year 2 to take advantage of lower rates. The buyer should factor in:
AThe prepayment penalty, which will increase the cost of refinancing✓ Correct
BOnly the new loan costs
CNothing; prepayment penalties are illegal in Connecticut
DOnly if the new rate is at least 2% lower
Explanation
Refinancing within the prepayment penalty period triggers the penalty, which could offset the savings from the lower interest rate. The buyer must calculate whether the interest savings from the new rate exceed the sum of prepayment penalty + new closing costs to determine if refinancing makes financial sense.
Related Connecticut Finance Questions
- Under Connecticut law, a 'mortgage' document contains all of the following EXCEPT:
- A Connecticut buyer's loan falls through 2 days before closing due to a last-minute job loss discovered by the lender. The purchase contract has a financing contingency that has already been removed. What can the buyer do?
- A Connecticut buyer has a mortgage with a 'negative amortization' feature. This means:
- Under the Home Mortgage Disclosure Act (HMDA), Connecticut mortgage lenders are required to:
- A Connecticut homeowner wants to access their home equity without selling or taking out a traditional loan. The best option that provides a revolving line of credit is:
- A Connecticut homeowner's adjustable-rate mortgage resets and the new rate increases their monthly payment significantly. This is an example of what type of risk for the borrower?
- A Connecticut borrower applies for a mortgage. The lender is required to provide the Loan Estimate within how many business days of receiving a complete loan application?
- A Connecticut borrower wants to compare two mortgages from different lenders. Lender A offers 6.5% with 1 point; Lender B offers 6.75% with no points. To compare these loans fairly, the borrower should consider:
Practice More Connecticut Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Connecticut Quiz →