Help, I'm confused!!

I have a multi-advanced, closed-end construction loan set up for 9 months on what will be the consumer's primary residence. I do not have a take out commitment, but I am sure once the construction phase is complete the consumer will refinance to another financial instiution (from comments made by consumer). Can I charge a prepayment penalty on the construction if the consumer does not obtain permanent financing with us?

How would that be a prepayment? The loan would be matured?

Yes, I agree the loan would be matured if the 9 months were up, but what if the construction phase ends in 6 months?

Did you contract for pre-payment penalty in your loan agreement? If not then you can't charge one.

Exactly, you cannot retroactively change a contract without the customer's agreement. I doubt they would agree.

Sorry I guess I should have mentioned this earlier...The lender has only received the application, the process is just starting.

I have to say, I have never seen a prepayment penalty on a construction loan.