A prepayment charge can be imposed on any amount prepaid in any twelve (12) month period which exceeds what percentage of the original principal amount of the loan?

The correct answer is 20%. In the context of mortgage loans, a prepayment charge is a fee that lenders may impose if a borrower pays off a portion of the loan balance ahead of the scheduled payment plan. Specifically, the prepayment charge can be triggered when a borrower exceeds a certain percentage of the original principal amount of the loan through prepayments within a twelve-month period.

In most cases, this percentage is set to protect lenders from the financial impact that unexpected early repayments can have on their expected interest income. The limit of 20% reflects a balance between allowing borrowers some flexibility to pay more without penalty while still providing lenders with a manageable level of assurance regarding the loan's performance over its term.

Understanding this limit is crucial for both borrowers and lenders to navigate the potential costs associated with prepayments effectively.