Asked by Erin  |  Submitted November 06, 2015

Why do some lenders charge a penalty if you prepay on a mortgage? Is there anything that can be done to lower/eliminate that penalty?

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  Answers  |  1

November 06, 2015

Hi Erin, Prepayment penalties, in general, are a relic of the "pre-mortgage meltdown" era. I don't know of any loans being originated today with pre-payment penalties, but suppose there could be some. Fannie/Freddie/FHA/VA/USDA do not allow pre-payment penalties, so the only loans that would potentially have them would be portfolio loans held by the actual bank making the loan, rather than guaranteed by any of the agencies I mentioned above. Hope that helps, Ted

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