If you want to pay a loan off early, the lender is going to miss out on the interest earnings they were going to make off of your payments, to offset this loss, they will charge you a prepayment penalty.

Prepayment Penalty Example:
Mortgage: $200,000
Interest Rate: 4%
Discount Given To You By Lender: 0.25%
Time Left: 2 years
Your Lenders 2-Year Interest Rate: 3.75%
Your Mortgage Pre-Payment Penalty: $2,000

If you have a $100,000 mortgage and a $100,000 term life insurance policy that you claim, you’d like to pay off your mortgage but you are missing the thousands of dollars that your lender is going to charge you for paying it off early.

If you’re covered by Mortgage Protection Plan, WE pay the lender all of your mortgage prepayment penalty fees when you make a claim.