Fixed-rate mortgages and adjustable-rate mortgages prepay at different rates.

Question

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Fixed-rate mortgages usually have higher prepayment penalties compared to adjustable-rate mortgages. This is because fixed-rate mortgages have a set interest rate for the entire term of the loan, while adjustable-rate mortgages have a rate that can change over time. Lenders typically charge higher prepayment penalties to compensate for the potential loss of interest income when borrowers pay off fixed-rate mortgages early.

Fixed-Rate Mortgages and Adjustable-Rate Mortgages Prepay at Different Rates