Code of Virginia

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Code of Virginia
Title 6.2. Financial Institutions and Services
Chapter 4. Certain Lending Practices

§ 6.2-421. Certain contracts to permit prepayment; amount of prepayment penalty.

A. For the purpose of this section:

1. "First deed of trust" or "first mortgage" includes all deeds of trust and mortgages, and amendments thereto, that are made by the same grantor or mortgagor, secure notes held by the same holder, convey substantially the same real estate, and are superior to all other deeds of trust or mortgages on the real estate; and

2. "Real estate" includes a leasehold estate of not less than 25 years.

B. Every loan contract, except as provided in subsection D, that is secured by a first deed of trust or first mortgage on real estate if the principal amount of the loan is less than $75,000, shall:

1. Permit the prepayment of the unpaid principal at any time; and

2. Not provide for a prepayment penalty in excess of one percent of the unpaid principal balance.

C. Any prepayment penalty provision in violation of subdivision B 2 shall be unenforceable as to the amount in excess of one percent of such balance.

D. The provisions of:

1. Subsections B and C shall not apply to secured or unsecured notes evidencing installment sales contracts; and

2. Subdivision B 2 and subsection C shall not apply to any loan contract that is (i) subject to § 6.2-422 or 6.2-1409 or (ii) governmentally regulated as to prepayment privilege.

1987, c. 622, §§ 6.1-330.69, 6.1-330.81; 2010, c. 794.

The chapters of the acts of assembly referenced in the historical citation at the end of this section may not constitute a comprehensive list of such chapters and may exclude chapters whose provisions have expired.