Do Second Mortgage Loans Have Prepayment Penalties?
Some second mortgage loans don’t charge a prepayment penalty. But, a 3 year pre-payment penalty is common with fixed rate second mortgages. Many home equity lines of credit (HELOCs) advertise no prepayment penalties. But, they generally have what’s known as “early termination fees”. Similar to prepayment penalties, early termination fees are fees charged for paying off and closing a line of credit before the end of the loan term. 1-year, 2-year and 3-year early termination fees are common with HELOCs. Fees may be as low a few hundred dollars (typically anywhere from $350 to $750). Or, the lender may charge a percentage of your outstanding balance (typically 1% to 3%). Now, an increasing number of lenders are charging an early termination fee equal to the cost of establishing the line (the “closing” costs incurred by the lender that were waived when you opened the line). These fees can add up to thousands of dollars. How Can I Avoid a Prepayment Penalty? If you are shopping for a loan,
