Finance
Oregon has a law limiting prepayment penalties on residential mortgages. Under Oregon law (ORS 86A.247), prepayment penalties on owner-occupied residential loans are:
AProhibited entirely for all residential mortgages
BAllowed for the first 5 years of any loan
CLimited to no more than 6 months' interest for the first few years and prohibited after the first several years✓ Correct
DUnlimited as long as disclosed in the loan documents
Explanation
Oregon law limits prepayment penalties on owner-occupied residential mortgage loans. Penalties are restricted in amount and prohibited after a certain period of the loan term (typically after 5 years).
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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