What are the caps for QM prepayment penalties?

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What are the caps for QM prepayment penalties?

Prepayment penalties on Qualified Mortgages are allowed, but there’s a limit to protect borrowers who want to pay off or refinance early. The cap is designed so penalties are modest and taper off over time, preserving the borrower's option to pay off the loan without heavy costs. The specified cap means a QM loan can charge up to 2% of the loan amount in each of the first two years, and up to 1% in the third year. This structure helps balance lenders’ costs with borrower protections and is why the option with 2% in years 1-2 and 1% in year 3 matches the rule. Higher, constant, or zero penalties in all years don’t fit this cap framework.

Prepayment penalties on Qualified Mortgages are allowed, but there’s a limit to protect borrowers who want to pay off or refinance early. The cap is designed so penalties are modest and taper off over time, preserving the borrower's option to pay off the loan without heavy costs.

The specified cap means a QM loan can charge up to 2% of the loan amount in each of the first two years, and up to 1% in the third year. This structure helps balance lenders’ costs with borrower protections and is why the option with 2% in years 1-2 and 1% in year 3 matches the rule. Higher, constant, or zero penalties in all years don’t fit this cap framework.

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