Real Estate Math
A Florida borrower is paying off a mortgage 5 years early. The remaining balance is $215,000. The lender charges a 2% prepayment penalty. What is the penalty amount?
A$4,300✓ Correct
B$2,150
C$6,450
D$10,750
Explanation
Prepayment penalty = $215,000 × 2% = $4,300. To solve this, multiply the relevant values: $215,000 at 2%..
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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