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Trulia San J…, Home Buyer in San Jose, CA

Is there a penalty for paying off a mortgage early?

Asked by Trulia San Jose, San Jose, CA Thu Mar 7, 2013

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Not all mortgages have a pre-payment penalty period attached to them.
You might want to refer back to the Note associated with your loan. If there is a pre-payment penaly is should included in the Note (or there should be a 1 page rider regarding that)
0 votes Thank Flag Link Thu Mar 7, 2013
A lot of Portfolio loans have pre-payment penalties
1 vote Thank Flag Link Fri Mar 8, 2013
It depends upon the loan. Some have pre-payment penalties, some don't. Check out whether yours has a penalty by contacting your mortgage broker or bank.
1 vote Thank Flag Link Thu Mar 7, 2013

Thanks for your question.

If your loan has a Pre Payment Penalty, be sure that you
as a Consumer, check the loan Documents and are not agreeing to one
in today's market.

I have had clients who had to pay $20K in pre pay penalties to regular banks
such as Countrywide, etc., who have gone under or have merged, such as those
that were leverage to stocks.

Since, the 2007 housing crisis, 99% loan of the loans do not
have Pre Payment penalties, unless you get a loan from a Hard money lender.

Quite a few loans prior to 2007 had pre pay penalties.

Best regards
Web Reference:
1 vote Thank Flag Link Thu Mar 7, 2013
Pretty much all loans originated after January 2008 do not have any pre-payment penalties. And if originated before you have likely passed the pre payment penalty period if there way one at all.
0 votes Thank Flag Link Mon Apr 1, 2013
Look at your loan records but it can also be worthwhile to contact your lender. If they can lend money at more favorable rates they may be glad to let you pay it off even if there is a prepayment penalty in the agreement.

Other things may come into play. After Bank of America took over Countrywide they were eager to refinance many of the loans.

Juliana Lee
Top 2 agent nationwide at Keller Williams Realty

Over 30 years experience
Over 1,000 homes sold in Santa Clara and San Mateo counties
Web Reference:
0 votes Thank Flag Link Mon Apr 1, 2013
Some lenders do charge a prepayment penalty for paying off a mortgage early.

The terms of the prepayment penalty, if there is one, will be found in the deed of trust.

That is one of the reasons why it is very important for you, your REALTOR and your loan officer to read the deed of trust very carefully so that you understand all of the terms in the deed of trust for your mortgage.

The Deed of Trust is a rather lengthy document and can be time consuming to read and understand.

A good REALTOR will request a copy of the Deed of Trust early and review it with you to make certain that it contains all of the terms that you agreed to, and does not contain any terms that you did not agree to.

That is one of the reasons that I ask for a copy of the Deed of Trust Early so that I can review the document with my client to make certain that all of the terms are correct and accurate, and that we understand all of the terms in the Deed Of Trust.

Thank you,
Charles Butterfield MBA
Real Estate Broker/REALTOR
American Realty
Cell Phone: (408)509-6218
Fax: (408)269-3597
Email Address:
0 votes Thank Flag Link Thu Mar 7, 2013
Penalties do vary between 120 days to 5 yrs.
So are HARD and some are SOFT

A SOFT prepayment penalty allows a borrower to sell their home at anytime without penalty, but if they choose to refinance the mortgage, they must pay that prepayment penalty.

A HARD prepayment penalty, on the other hand, sticks the borrower with a penalty if they sell their home OR refinance their mortgage. Obviously this is the tougher of the two, and basically gives a borrower no option of jumping ship if they need to sell their home quickly.
0 votes Thank Flag Link Thu Mar 7, 2013
If you do not have the Note, you might want to give me a call or shoot me an email as I might have access to your loan documents (public records)...Cheers
0 votes Thank Flag Link Thu Mar 7, 2013
Thierry I am suing the Bank of America for overcharging the borrowers billions of dollars over 40 or more years. Are you doing business with them? If so, I would love to see a note and especially the calculation of interest term. case Zachary Pavlides v Bank of America Thank you, if you can help.
Flag Thu May 21, 2015
You will need to read your loan documents. Some loans have a prepayment penalty if paid off less than a year. Not all have that, some have 6 months or no penalty at all.

If you are not sure, call the loan agent who helped you.
Web Reference:
0 votes Thank Flag Link Thu Mar 7, 2013
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