What kinds of penalties apply when the home is sold or the loan is prepaid?

Answer 1

The easiest way to find out if you currently have a prepayment penalty is to dig out the paperwork you have from when you signed your final paperwork and look for your mortgage note. There usually

will be wording in your note that outlines the prepayment penalty terms. Use a calculator like this one from the acalculator.com to see your savings.

Answer 2

A mortgage prepayment penalty can come with an attractive lower rate but the prepayment penalty can be high if you need to sell too soon or want to pay of the debt too soon. Lenders have different policies so you must check with each lender before you borrow to determine your risk. There could be a sliding scale such as 5% the first year, 4% the second year, etc. There might be a fixed amount for the life of the loan. You must read (and understand) the small print carefully.