Can you make extra payments/ pay off a loan early or is there generally penalties for doing so?

Asked by Tanya, Buffalo, MN Wed Feb 9, 2011

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Susan Hoffla…, Agent, Shoreview, MN
Wed Feb 9, 2011
Hi, Tanya!
More often than not, there are no pre-payment penalties associated with a mortgage. As a matter of fact, I think I remember that MN does not allow loans that have a pre-payment penalty attached. Check with your lender if you can't find where it addressed that in your closing documents.

If you are paying off your mortgage ahead of time, GOOD FOR YOU!!!!! You'll be ahead of the game in the long run! Good luck, Tanya~
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Peter Boyle, , Minneapolis, MN
Wed Feb 9, 2011
Generally those types of loans are a thing of the past. If your loan was originated within the last 4 years, the chances that you have a Prepayment Penalty is almost 0%, and any new residential mortgages written generally do not allow for these PPP’s. You need to look at the Promissory Note and Mortgage you signed at closing to be sure. If a PPP exists, then it would be contained in the body of the note or on a Prepayment Penalty Rider. Even if a PPP requirements exists on your mortgage, it typically applies to principal payments made in excess of 20% of the total outstanding balance within a 12 month period, so some level of accelerated payment may be allowable without penalty.
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David P Tsch…, Agent, Littleton, CO
Wed Feb 9, 2011
Hi Tanya-

The only real way to tell is to check your loan documents. Most loans allow you to payoff early without incurring any penalty, however there are some loans that will have prepayment penalties. Typically those penalties are tied to payments greater than 20% of the remaining balance or they can be tied to the length of time you note has been in existence with the current lender. You can find this information easily by looking a your promissory note, typically paragraph 4, titled prepayment penalty and read the terms. If there is a penalty it will be defined in this area of your note. Hope this helps. David
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Vanya Hristo…, Agent, Roswell, GA
Wed Feb 9, 2011
Hi Tanya,
As a rule, there is no mortgage pre-payment penalty for the payoff of a principal residence, so be wary of a lender who claims the opposite and make sure that you know the answer to this question before you go to closing. Different rules may apply to comercial properties. I hope that answers your question.
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Laura Feghali, Agent, Stamford, CT
Wed Feb 9, 2011
Hello Tanya,
If you look on your closing documents you will be able to see if there are any penalties for an early pay-off on your loan. Usually there are no fees involved for additional payments to the principal. Again, refer to your closing docs for this information or call the lender and inquire.
Good luck!

Laura Feghali
Prudential Connecticut Realty
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