Is there such a thing as a law that prevents paying pre-payment penalties on an adjustable rate mortgage?
QUESTION: Carrie and her husband have an ARM (adjustable rate mortgage). The contract with the mortgage company said there are pre-payment penalties, but Wisconsin has a law against charging pre-payment penalties. Can a contract override the state law?
ANSWER: Some states have a prohibition to pre-payment penalties on mortgages. A contract does not override state law. If the state law prohibits pre-payment penalties, then you won’t have to pay the penalties – even if you signed a contract that says you do.
Call the Department of Commerce for your state to find out if your state prohibits pre-payment penalties.
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