In the United States, fixed rate mortgages (FRM), like other types of mortgage, may offer the ability to prepay principal (or capital) early without penalty. Early payments of part of the principal will reduce the total cost of the loan (total interest paid), and will shorten the amount of time needed to pay off the loan. Early payoff of the entire loan amount through refinancing is sometimes done when interest rates drop significantly.
Some mortgages may offer a lower interest rate in exchange for the borrower accepting a prepayment penalty.
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