Prepayment penalties are a very real concern for consumers that have loan packages that include penalties to prepay (meaning paying off the loan in advance of the end of the term of the loan).
Though homebuyers assume that any lender will be happy to receive money in advance and there would be no penalty to do so, it is important to find that out. Depending on the structure of the loan, a lender may lose substantial income if you pay in advance and therefore they may have built into the mortgage prepayment penalties.
Prepayment penalties are something you will want to ask your loan officer about and request your attorney look into before you sign your loan documents. Prepayment penalties can be significant enough to a have substantial impact on the overall financial status of the homeowner who wanted to prepay his or her loan.
If you are considering prepaying your loan, it is a good idea to check again with the lender before you are forced to pay prepayment penalties perhaps even without realizing that it was possible that you would owe them.
Not all lenders disclose prepayment penalties very clearly so make sure you ask the question and get a clear understanding of what the answer is. Also, make sure you request to see whether or not there are prepayment penalties in writing, especially in the mortgage documents you will be signing at the Closing. No one likes surprises especially bad surprises when they are doing good things and that is precisely how many people view prepayment penalties.
