Q: What is the best way to avoid a prepayment penalty in order to refinance my home loan? As long as I don’t pay any more than 20% of the balance at a time, I will not be charged a penalty.

Even if I do have to pay a penalty I think it would be in my best interest to refinance since my current rate is 6.875%. Do you agree?

A: How much is your prepayment penalty? If your loan is $200,000 and you have a 2 percent prepayment penalty, it’ll cost you an additional $4,000 to refinance.

If you save $200 per month on your mortgage, it’ll take you nearly two years to pay off the just the prepayment penalty with your savings. Then, you’ll have to pay off the cost of the refinance.

If you’re going to live there more than three years, it’s probably worth it. But first ask your lender if you are eligible for a streamline refinance or a modified mortgage program. That’s where your lender will simply lower the rate of your mortgage and only charge you a few hundred dollars. If not, start shopping around.

And next time, don’t get a loan with a prepayment penalty. There are too many things that can happen (including job loss, death of a spouse or partner, medical problems, disability, taking a new job, or simply lower interest rates) that could cause you to sell your house or refinance and trigger this expensive fee.