Finance
A Florida buyer obtains a mortgage with a 'prepayment penalty' clause. This clause means:
AThe buyer pays extra interest if they make larger-than-required monthly payments
BThe buyer must pay a fee if they pay off the mortgage early or refinance within a specified period✓ Correct
CThe lender can prepay the mortgage at any time by purchasing the home
DMonthly payments are prepaid 30 days in advance
Explanation
A prepayment penalty requires the borrower to pay a fee (typically a percentage of the outstanding balance or several months' interest) if they pay off the loan early — through refinancing, sale, or extra principal payments. Prepayment penalties protect lenders' expected interest income. Florida and federal law restrict prepayment penalties on certain loan types (QM loans have limited prepayment penalty provisions).
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