Do I have the right to pre-pay a mortgage?

UPDATED: Sep 30, 2022

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Do I have the right to pre-pay a mortgage?

I have a $50,000 mortgage to a private individual on and old house and 12 acres of land financed at 7%. The mortgage is 6 months old. We have paid on time every time. Now, I’ve had some extra money to come to me and want to pay off the mortgage. The mortgage note had an agreement that I could not pay off for 3 years and then if paid off, we would pay 1% of unpaid amount in pre-payment penalty. The note holder refuses to allow me to pay it off. Is there a law that would allow me to pay it off now?

Asked on January 19, 2016 under Real Estate Law, North Carolina


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

A mortgage from a bank would have to allow you to private pay. But a private loan, whether a mortgage or otherwise, can have a clause prohibiting pre-payment and/or imposing penalties for pre-payment, so the restriction on your ability to pre-pay is legal and enforceable.

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