Hard Prepayment Penalty

Hard Prepayment Penalty

• A. A policy that if a property is sold or refinanced within a certain time frame, the lender could charge a set penalty
• B. A policy that restricts the borrower from selling the property
• C. A penalty for late mortgage payments
• D. A policy for property taxes

Answer: (A)

Hard prepayment penalties are fees charged if you pay off a mortgage early within a set period after origination. They kick in when the loan is prepaid because you sell the property or refinance, and the penalty applies regardless of which lender you use. That description matches the statement about a policy that imposes a set penalty if the property is sold or refinanced within a certain time frame. The other descriptions don’t fit because they refer to something else: late-payment penalties for missed payments, taxes, or selling restrictions.

Hard prepayment penalties are fees charged if you pay off a mortgage early within a set period after origination. They kick in when the loan is prepaid because you sell the property or refinance, and the penalty applies regardless of which lender you use. That description matches the statement about a policy that imposes a set penalty if the property is sold or refinanced within a certain time frame.

The other descriptions don’t fit because they refer to something else: late-payment penalties for missed payments, taxes, or selling restrictions.