RE Term of the Day: Prepayment Penalty

Prepayment Penalty:  Often, sellers think that all that is owed is the amount showing on their last statement.  This is not always true.  Even though daily interest is the usual difference in the balance on your last statement and the amount owed at closing, a prepayment penalty could be in your mortgage.  A good agent (and great lender) will make sure that when you purchase a home with YRL that you don't end up with a Prepayment Penalty but it can happen.  Usually a prepayment penalty is stuck in the loan documents to be charged if a buyer refinances too early (for example) for the lender to make its money back on the loan itself.  Or, for instance, when a event occurs that would cause one to sell their home within a short period of time, the lender may have a time limit on selling too soon and collects money back at the time of closing.  Your YRL agent can explain this to you and make sure that your loan application states no prepayment penalty.