Preferred Financial Group

"We listen, we educate, then we perform like no one else in the industry."


Frequently Asked Questions

"Can Prepayment Penalties Be Avoided?"


Yes. In most cases, a borrower can avoid having a prepayment penalty on their loan. Unfortunately it may require some questioning and investigation. Remember, in theory, a loan with a prepayment penalty feature should provide the borrower with a lower interest rate. However, in reality, a loan with a prepayment penalty generally puts more money in the pockets of a lender or mortgage broker.


We believe that the more you know about prepayment penalties, the less likely it is that you will end up with a prepayment penalty. Think about it. If you’re talking to a lender or broker about a loan and you question the prepayment penalty feature, they will have to assume that you have some knowledge about this feature and therefore will be less likely to steer you there.


Questions to Ask:

Here are a few questions for the lender or mortgage broker:

  • “Does the loan you are discussing have a prepayment penalty?”
  • "Will it benefit to me to accept a prepayment penalty?”
  • “Is it a soft or hard prepayment penalty?”
  • “How is the prepayment penalty calculated?”
  • “Will it be indicated in the Truth In Lending Disclosure you will provide me?”
  • “Can I review any Prepayment Penalty Addendums, Riders or Disclosures?”
  • “Can I buy out the prepayment penalty?"
  • “Are there other loans for me without a prepayment penalty?”