Jan 27
What Is Prepayment?
When you take out a mortgage loan, you are required to pay a certain amount per month until that loan is paid off. However, a prepayment is an amount that you pay before the due date, to reduce the principal balance of the loan. This could mean that you pay more than you need to each month or just some months, you send in extra money at a random time of the month, or you pay the mortgage amount in full. You could pay the mortgage in full if the property was sold, if you acquired a large sum of money and want to use it toward the mortgage, or because of a foreclosure.
Because this prepayment occurs before the loan has fully amortized, you may have to pay a prepayment penalty. Still, if you can get the mortgage paid off and not have to worry about it each month, it may be worth paying the penalty. Discuss the rules and options with your mortgage lender to find out what is the best way for you to pay off your mortgage loan as soon as possible.
