How Do You Calculate A Mortgage Penalty?
During the era of subprime mortgage lending, prepayment penalties were a common feature. Many (but not all) home mortgages contained them. Some prime loans (FNMA, FHLMC) contained them as well. A prepayment penalty is a fee charged to the borrower for paying a loan off early. Legislation has been passed in some states making prepayment penalties on home loans illegal. While most commercial loans carry prepayment penalties, you may not see them on first mortgage home loans for primary or second homes that closed in years 2008 and 2009. Look through your mortgage papers for the promissory note stipulating how your loan is to be paid. Your note is the instrument that creates the debt on your property. It details the amount of the loan, payments, how the prepayment penalty works and dates that the penalty (if you have one) is in force. Call your lender to obtain the balance as of the date when you plan to pay off the loan. Read your note to see how your prepayment penalty is assessed. One
