Question:

Is there always early pay off penalty for a mortgage loan?

Answer:

An early pay off penalty is very likely to be inserted in your mortgage loan agreement. Partial prepayment is usually allowed - up to 20% of the loan balance yearly without an early pay off penalty is common.

Lenders usually apply early mortgage pay off penalties to subprime loans. They can be hard penalties (when both sale and refinance are forbidden); or soft prepayment penalties - when only sale is forbidden.

Is there an early pay off penalty for a partial monthly prepayment?

Usually, no. Extra monthly and annual payment towards the principal is generally allowed by most lenders without any penalty.

Full mortgage prepayment in the early years of the loan may trigger a prepayment penalty, if one was included in the mortgage agreement. Sometimes prime borrowers may be offered rate reduction if they agree to accept a prepayment penalty and it may be reasonable to accept it if they are staying in this home for longer than the period the prepayment penalty holds.

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