Currrent as of February 4, 2022

Business & Professions Code § 10242.6

Prepayment of interest on loan; Imposition of prepayment charge; “Owner–occupied dwelling”

(a) The principal and accrued interest on any loan secured by a mortgage or deed of trust on real property containing only a single–family, owner–occupied dwelling may be prepaid in whole or in part at any time but only a prepayment made within seven years of the date of execution of such mortgage or deed of trust may be subject to a prepayment charge and then solely as herein set forth. An amount not exceeding 20 percent of the unpaid balance may be prepaid in any 12–month period. A prepayment charge may be imposed on any amount prepaid in any 12–month period in excess of 20 percent of the unpaid balance which charge shall not exceed an amount equal to the payment of six months’ advance interest on the amount prepaid in excess of 20 percent of the unpaid balance.

(b) Notwithstanding subdivision (a), there shall be no prepayment penalty charged to a borrower under a loan subject to this section if the dwelling securing the loan has been damaged to such an extent by a natural disaster for which a state of emergency is declared by the Governor, pursuant to Chapter 7 (commencing with Section 8550) of Division 1 of Title 2 of the Government Code, that the dwelling cannot be occupied and the prepayment is causally related thereto.

(c) As used in this section, “owner–occupied dwelling” means a dwelling which will be owned and occupied by a signatory to the mortgage or deed of trust secured by the dwelling within 90 days of the execution of the mortgage or deed of trust.


Added Stats 1973 ch 641 § 4. Amended Stats 1985 ch 1355 § 7; Stats 1990 ch 663 § 1, (AB 3660).

Prepayment Penalty California