I am teaching a homebuyers' seminar, and one of the participants asked me a question that I can't answer, since we only lend in New Jersey.

Are there any prepayment penalties on residential mortgages in Pennsylvania? If so, what are they?

Thanks in advance for your help!

[41 PA Stat Ann]
§ 405. Prepayment penalty prohibited.
Residential mortgage obligations contracted for on or after the effective date of this act may be prepaid without any penalty or other charge for such prepayment at any time before the end of the period of the loan.

"Residential mortgage" means an obligation to pay a sum of money in an original bona fide principal amount of fifty thousand dollars ($50,000) or less, evidenced by a security document and secured by a lien upon real property located within this Commonwealth containing two or fewer residential units or on which two or fewer residential units are to be constructed and shall include such an obligation on a residential condominium unit.

There is also a provision under the Secondary Mortgage Act at 7 Pa. Stat. Ann. Section 6612 which I can not access but I believe it states that a prepayment penalty is not permitted under that act.

Secondary mortgage loan is a loan in an original principal amount in excess of $5,000 which is secured in whole or in part by a lien upon any interest in real property created by a security agreement, including a mortgage, indenture, or any other similar instrument or document, which real property is subject to a prior mortgage and which is used as a dwelling, including a dual purpose or combination type dwelling which is also used as a business or commercial establishment and has accommodations for not more than four families, except that a loan which:
1. is to be repaid in 90 days or less;
2. is the result of the sale of a dwelling if title to the dwelling is in name of the seller and the seller has resided in said dwelling for at least one year and the buyer is purchasing said dwelling for his own residence and, as part of the purchase price, executes a second mortgage in favor of the seller;
3. is not subject to the maximum legal rate of interest established by Section 201 or Section 301 of the act of January 30, 1974 (P.L. 13, No. 6) referred to as the Loan Interest and Protection Law, by reason of any of the exemptions provided in section 301 (f) of said act; or
4. is made under any other law of the Commonwealth of Pennsylvania

Thank you very much! And, on behalf of my student, thank you!