pre payment penalties

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pre payment penalties



8.  Pre payment penalties


A pre payment penalty occurs when a mortgage is paid off prematurely in its early years, typically when a buyer sells the property. Loans with pre payment penalties have fallen out of favor and in many localities are not legal. Be sure to ask if the loan you are applying for carries a pre payment penalty, so you don’t have any surprises when you go to sell your property down the road.

You can wind up with surprise capital gains tax at the federal, state or local level when you sell your property. You don’t want a surprise mortgage pre-payment penalty on top of that.



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