Mortgage Lender Must Disclose Prepayment Penalty

Added May 3, 2007 by Ilyce R. Glink

Print Articles

Summary: Always read and understand all your mortgage closing documents. Even if you're not aware that your mortgage has a prepayment penalty, if you sign the loan documents you're responsible to pay it. A prepayment penalty can kick in when you sell your home or when you refinance - whenever you pay off your old mortgage loan.

Q: Even though he knew that my home was on the market for sale, my loan officer helped us refinance our house to lower our monthly mortgage payments. He did disclose that there was a prepayment penalty.

Six months after we refinanced, we sold the home and incurred $80,000 prepayment penalty. The prepayment penalty was in the loan documents which were 2 inches thick, but we did not see this language when we signed them.

What was the loan officer's duty to disclose the prepayment penalty?

A: He did disclose that there was a prepayment penalty. You admit this much in your letter. Your first very costly mistake was not asking how much and when it kicked in.

At the closing, you were required to sign several documents on which the information about the prepayment penalty was disclosed. Your next costly mistake was not reading those documents thoroughly and asking questions about what the disclosures and paperwork meant if you didn't know the answer to something.

While I feel for your prepayment penalty pain, you made several mistakes in the process and ultimately, you're probably legally responsible for what you sign.

However, if the loan officer took advantage of you and hid the fact that the prepayment penalty was so high, you may have a case against the loan office. But to know more about this, you should talk to an attorney about your case.

Recently some lenders have gotten into trouble for giving loans to borrowers who clearly did not qualify for the type of loan given to them. While this may not be your case, the methodology used in getting you to take this loan may have been improper.

May 3, 2007.

See more articles on this topic by clicking on the "RELATED ARTICLES" above and to the right.

We have over 5000 articles on Real Estate Advice, Personal Finance Advice and Consumer Advice on our site. We encourage you to look at these articles. As always, if you have a comment on our articles, don't forget to post your comment below. We thank you for coming to ThinkGlink.com.

© Ilyce R. Glink. All rights reserved. This content may not be used, distributed, syndicated, compiled or excerpted in any medium or form without written authorization from Think Glink, Inc. For information on syndicating ThinkGlink.com please contact us.

Previous article Next article