Finance
What is a 'prepayment penalty' and do they appear in Hawaii mortgages?
AA. A fee for making payments before they are due; common in all Hawaii mortgages
BB. A fee charged by some lenders when borrowers pay off their loan early; less common in today's market but may appear in some non-QM and commercial loans✓ Correct
CC. A penalty for failing to pay property taxes on time
DD. A fee for requesting payoff information from a lender
Explanation
A prepayment penalty is a fee charged when a borrower pays off a mortgage early, compensating the lender for lost interest income. Most modern conforming and FHA/VA loans in Hawaii do not have prepayment penalties. However, some non-QM loans, commercial mortgages, and older mortgages may include prepayment penalty provisions. These must be disclosed under TILA.
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