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Author: ems79 Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127236  
Subject: Definition of a pre-payment penalty Date: 12/9/2013 10:27 AM
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When I refinanced this summer, part of the documentation I received said that there are no pre-payment penalties with my loan. The closing attorney that I met with all stated there were no penalties...

A few months after the closing I received a letter from the bank saying that a form had been omitted from the original closing docs and that I needed to sign and return it. The form says that I'd owe the bank money (some closing costs?) if I close the loan before 36 months.

While I don't believe I was ever told about this fee during the process, I do see that it's listed in the 5-pt point at the bottom of their current advertisements for the same product, so I assume it was there when I applied...

After hemming and hawing about my obligation to sign it or not, I decided to do it because I will save more than the fee itself within the first year thanks to lower rate and the reappraised value allowing me to drop PMI. I'd rather not fight a battle now for something that may never even be an issue (I probably won't close the loan within 36 months anyway).

But to me this seems like the type of thing that should be plainly stated as a form of pre-payment penalty. I realize it may not be strictly part of the mortgage itself, but it just seem disingenuous to state no pre-payment penalty, while at the same time effectively having a pre-payment penalty.
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