How much can prepayment penalties be?? - Posted by Larry(MO)

Posted by Dave T on May 21, 1999 at 21:49:10:

You have to refer to the language of your note itself for the answer to your question. Often there is a note “rider” that explains exactly how much the prepayment penalty is and when (or if) it expires.

I have a couple of notes with prepayment penalties. The first provides for six months interest as the penalty if I pay off the note in the first six months. Another has a three year prepayment penalty period with a sliding scale on the prepayment penalty – the longer I hold the note, the less the penalty until reduced to zero after 36 months.

FHA notes may require the last full month of interest as the prepayment penalty. This means that no matter when you redeem the note during the month, you will still have to pay the entire month’s interest.

VA notes have no prepayment penalty, but the loan servicer may have restrictions on the minimum amount that you can add to the payment for principal reduction each month.

Check the language of your note.

How much can prepayment penalties be?? - Posted by Larry(MO)

Posted by Larry(MO) on May 21, 1999 at 20:09:44:

Have a 38000 note on a 30 year at 8.5%. The note specifies that prepayment penalty for early payoff.

Is there a limit to the amount of penalty and what could the penalty amount to (i plan on paying off in 15 years)
according to the contract i can make additional principal

Is the penalty more substantial if i sold or refinanced at one lump sum and will i get small penalties along the way for prepayment of small amounts or both.

Thanks for the help. Larry