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• Extra fees that may be due if you pay off your loan early by refinancing the loan or by selling the home. The penalty is usually limited to the first 3 to 5 years of the loan’s term. If your loan includes a prepayment penalty, make sure you understand the cost. Compare the length of the prepayment penalty period with the first adjustment period of the ARM to see if refinancing is cost-effective before the loan first adjusts. Some loans may have a prepayment penalty even if you make a partial prepayment. Ask the lender for a loan without a prepayment penalty and the cost of that loan.

  The Federal Reserve Board - Cite This Source - This Definition
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  Cite Definition for Prepayment penalty

  American Psychological Association (APA)

  Prepayment penalty. (n.d.). A Consumer's Guide to Mortgage Refinancings. Retrieved May 28, 2023, from website: http://www.expertglossary.com/definition/prepayment-penalty.

  Chicago Manual of Style (CMS)

  Prepayment penalty. www.federalreserve.gov. A Consumer's Guide to Mortgage Refinancings. The Federal Reserve Board. http://www.expertglossary.com/definition/prepayment-penalty (accessed: May 28, 2023).

  Modern Language Association (MLA)

  "Prepayment penalty." A Consumer's Guide to Mortgage Refinancings. The Federal Reserve Board. 28 May. 2023 http://www.expertglossary.com/definition/prepayment-penalty.

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