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17 February, 06:28

Jonathan is in the process of refinancing his home loan. Due to the lowering of interest rates and Jonathan's credit score improvement, he has been able to secure a conventional loan with an excellent annual percentage rate. Unfortunately, his current loan contract contains a stipulation that if he repays the loan before three years, he will owe the lender a fee of two percent of the loan balance. Which clause applies to Jonathan's situation?

A) Subordination Clause

B) Subrogation

C) Prepayment Penalty Clause

D) Alienation Clause

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  1. 17 February, 06:54
    0
    The correct answer is letter "C": Prepayment Penalty Clause.

    Explanation:

    The Prepayment Penalty Clause serves as collateral for lenders when borrowers pay off the sum of debt before agreed. Even though the debt would be totally paid, financial institutions lose profits in interest rates. Then, the Prepayment Penalty Clause states a fee - usually a percentage - should be paid in case the lender finishes to pay the debt before what was signed in a loan.
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