Final answer:
The prepayment options for a mortgagor commonly include early payment penalty, extra payments, refinancing, and recasting.
Step-by-step explanation:
The prepayment options for a mortgagor (borrower) commonly include the following:
- Early Payment Penalty: Some mortgages have penalties if the borrower pays off the loan before a certain time period. This penalty is typically a percentage of the remaining loan balance.
- Extra Payments: The borrower can make additional payments towards the mortgage principal, reducing the total interest paid over the life of the loan and potentially shortening the loan term.
- Refinancing: The borrower can choose to refinance their mortgage, which involves obtaining a new loan with improved terms to pay off the existing mortgage.
- Recasting: Some mortgage lenders offer the option to recast the loan. This involves making a large lump-sum payment towards the principal, which reduces the monthly payment amount.