A prepayment penalty clause requires the borrower to pay a penalty if the mortgage is repaid in full within a certain period.

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A prepayment penalty clause does indeed require the borrower to pay a penalty if the mortgage is repaid in full before a certain period of time, usually a few years. This clause discourages borrowers from refinancing or selling their homes too soon after taking out the mortgage.

A Prepayment Penalty Clause Requires the Borrower to Pay a Penalty