Property Ownership
A Florida mortgage that has a 'prepayment penalty' means:
AThe borrower must prepay insurance before closing
BThe borrower may be charged a fee for paying off the loan before the scheduled term✓ Correct
CThe lender requires two extra payments at the start
DThe property taxes must be pre-paid for the year
Explanation
A prepayment penalty clause in a mortgage allows the lender to charge a fee if the borrower pays off the loan early. This compensates the lender for lost interest income. Florida law restricts prepayment penalties on certain residential mortgages.
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