Are mortgage prepayment penalties illegal in Arizona?

I'm planning on getting a rate adjustment for my home loan, on the form it states that there is a 1 year prepayment penalty of 3%. I remember my original loan officer saying that prepayment penalties are illegal in Arizona but the customer service rep for my mortgage company says the company is not in Arizona so the penalty still applies. I think that is wrong and I'm hoping the verify that.Are mortgage prepayment penalties illegal in Arizona?
Mortgage prepayment penalties in Arizona are quite legal, as long as you were made aware of such penalty when you signed the mortgage documents. To avoid any such penalty, simply wait until your one year time limit has expired.Are mortgage prepayment penalties illegal in Arizona?
If you are past the one year mark, will this even apply? I think if the contract is written that way, and you haven't reached the year mark, then you might have to pay it. If you are close on the one year mark (say this is month 10 of 12) ask your bank if you can postpone the adjustment until after month 12 and avoid the penalty.





Try calling the division of banks in Arizona (state government office) and ask them about the banking rules. They can give you a more definitive answer.

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