Anticipation
Paying the amount one owes before it is due. Although this can result in a
savings on interest charges, it can result a
Prepayment Penalty.
Example:
Abel borrowed $200,000 last year at 6% interest on a 30-year mortgage. If he
pays the remaining Principal now, in one lump sum, there will be a 5% prepayment
penalty that amounts to $10,000.
