A prepayment penalty is a price or cost, that you should pay to the financial institution in the event you decide to repay a mortgage earlier than the tip of its time period.RBI permits banks to calculate prepayment prices solely on the excellent mortgage quantity. Typically, the longer you’ve had your mortgage, the lesser your excellent mortgage, and subsequently the smaller your penalty.
Floating charge dwelling loans taken by people are exempt from prepayment charges. For others, banks cost a prepayment penalty of 2-3% on the excellent mortgage quantity on the time of prepayment.
As a borrower, it’s pure to plan to shut your mortgage earlier than time to reduce your borrowings and month-to-month curiosity burden. However, ensure that to examine the prepayment penalties to determine if the financial savings are value it.
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