Thank you for your question.
The terms of repayment of a loan are controlled by the loan agreement itself. When a debtor attempts to repay the loan early, this may trigger other provisions in the loan designed to protect the lender (who has designed the loan to get maximum commercial benefit to themselves).
From the statement of facts in your question, it seems that the loan may have contained a provision requiring an appraisal through an appraiser of the lender's choosing when the debtor wishes to pay off the loan ahead of schedule. Thus, it is likely that your grandmother is bound by these terms, if they were properly disclosed in the loan agreement. The terms must be clearly stated in the loan agreement under the Truth in Lending Act. If they are not, then your grandmother may be able to get out of this requirement.
In conclusion, you need to obtain the loan agreement and read through it to see if the term requiring an appraisal for an early payoff of the loan is in the terms of the agreement. If it is not, then you can tell the bank that they cannot require this pursuant to the terms of the agreement. If it is in the document, then your grandmother is stuck with having to undergo the appraisal at her own expense.
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