Finance
A Wisconsin mortgage with a 'prepayment penalty' charges the borrower an additional fee for:
AMaking minimum required payments
BPaying off the loan balance early or making payments above the scheduled amount✓ Correct
CLate payments
DInterest rate adjustments on an ARM
Explanation
A prepayment penalty is a fee charged by some lenders when the borrower pays off all or a significant portion of the loan ahead of schedule.
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Key Terms to Know
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Math Concepts
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