How can I find out if my mortgage has a prepayment penalty?

Asked by Laurie Manny, Long Beach, CA Thu May 17, 2007

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Rhonda Porter, , Seattle, WA
Thu May 17, 2007
BEST ANSWER
If your mortgage has not closed yet, be sure to ask your loan originator if your mortgage has a prepayment penalty. It may also be disclosed on the Federal Truth in Lending that should have been provided with your Good Faith Estimate. If you all ready have your mortgage, you should dig out your stack of papers your received from the escrow the company. The prepayment penatly should be disclosed as an attachment to the Note. You can read more about prepayment penalties from my link below.
3 votes
California M…, Agent, Oceanside, CA
Mon Jul 30, 2007
Look at your note. There should be a prepayment rider attached
Web Reference:  http://delmar.typepad.com/
2 votes
Aaron Wheeler, Agent, San Francisco, CA
Sun Jul 29, 2007
The prepayment penalty terms are typically in a rider to the note. You can obtain a copy of your note by calling your bank. Most lender customer service departments should have the details of the prepayment penalty readily available without having to look at the note, though.

There are two different types of prepayment penalties - "soft" and "hard".

A "soft" prepayment penalty does not apply if you sell your home, but does apply if you refinance. The bank will usually ask for a copy of the final HUD-1 Settlement Statement from the closing agent as proof that the home was sold before waiving the penalty.

A "hard" prepayment applies regardless if you refinance or sell.

You should carefully evaluate your situation before accepting a pre-payment penalty. I have seen some penalties running as high as six (6) months interest. Ouch.

If you are in the process of applying for a new mortgage, you can typically find out if your loan has a prepayment penalty by reviewing the Federal Truth-in-Lending Statement or a copy of the loan commitment letter from the bank. Don't be surprised at the closing table when it may be too late.
2 votes
California M…, Agent, Oceanside, CA
Fri May 18, 2007
Read the note before you sign it. If it has a "prepayment penalty rider" the terms of the penalty are in the note. If the loan is closed, look for the rider in the closing package.
Web Reference:  http://brian-brady.com
2 votes
Rhonda Porter, , Seattle, WA
Sun Jul 29, 2007
Don't wait until you're at the signing table to read the note. Ask your LO upfront before your lock in your mortgage and review the TIL. If you're surprised at closing with an unexpected prepay BALK! Don't accept it.
1 vote
Kristal Kraft, Agent, Greenwood Village, CO
Mon May 21, 2007
So many buyers are finding they forgot to ask for a loan without a prepayment penalty. It is a said thing when we go to closing and find out they owe much more on the note than they had anticipated!
1 vote
Debt Free Da…, , 85260
Mon Nov 26, 2007
There should have been a separate prepayment penalty rider that you signed. I would just look in your closing package and see if you have a document like this. You could also just call the company servicing your mortgage. They should know.
Web Reference:  http://GetPrequalified.com
0 votes
Scott Messier, , Solana Beach, CA
Wed Sep 26, 2007
Brian Brady hit it right on the head. Look at your Note or see if there is a pre-payment rider attached. If you can't find it you can all your lender and ask them to provide the rider. It should all start with the Mortgage Professional educating you upfront on the benefits of a pre-pay or if the loan is attached to one. Most lenders will require a pre-pay for ALT-A and sub-prime loans with highe LTV's and lower credit scores so they can be sure to recoup their investment and risk associated with the loan. Some Mortgage brokers may let their clients know that extended years from 1-5 on the pre-pay may yield lower rates as well as additional dollars to cover some of the closing costs associated with the loan. Always ask and check ALL paperwork on your next purchase transaction!
0 votes
Mikhail Shto…, , San Francisco, CA
Thu May 24, 2007
read your note. or call your mortgage company to check on that.
0 votes
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