Legal Question in Real Estate Law in Illinois

Mortgage PrePayment Penalty

I was looking at my Mortage contract and noticed there is a prepayment penalty. I have a 2 year ARM, and there is a penalty if paid off before the first year is up.

I live in Illinois and have heard that Prepayment penalties are illegal in Illinois. Is this true? And how can I get this off of my mortgage contract?

I found, this under the Illinois Interest Act ("Act") (815 ILCS 205/o.01 et seq.) 815 ILCS 205/4

Is this true and can I get out of it?

Thanks...


Asked on 8/13/00, 9:35 pm

2 Answers from Attorneys
Zedrick Braden III

Re: Mortgage PrePayment Penalty

Hello. It might be a good

idea to contact the office

of the Illinois Attorney

General. That office has

broad powers to investigate

companies that do business

in the State of Illinois.

You might want to contact

the Springfield office of

the Illinois Attorney General

for the best results. It

would also be a good idea

to follow up with a letter

and send a copy of the mort-

gage. Good luck!

Read more
Answered on 9/27/00, 10:40 pm
Thomas Moens Moens Law Offices, Chartered

Re: Mortgage PrePayment Penalty

There is a federal statute, called the Parity Act, which basically says no matter what state law says, if you agreed to pay a prepayment penalty at the time you signed the loan documents, you are stuck with it. It may not apply in your circumstance, but more often than not, it does.

Read more
Answered on 9/20/00, 2:12 pm


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