California Real Estate Practice Exam

Which loans do not have prepayment penalty provisions?

1. Cal-Vet loans

2. FHA and VA loans

3. FHA loans

4. VA loans

The correct answer is: Cal-Vet loans

The ability for borrowers to pay off a loan early without incurring penalties is an important aspect of mortgage terms. Cal-Vet loans specifically do not have prepayment penalty provisions, allowing borrowers to pay off their loans at any time without facing additional fees. This feature supports veterans by providing greater financial flexibility, enabling them to refinance, sell their property, or pay off their loan earlier if they choose to do so. In contrast, while both FHA and VA loans also generally do not come with prepayment penalties, the context of the question emphasizes Cal-Vet loans. FHA loans and VA loans typically have similar payoff conditions, allowing prepayment without fees as well, but they are not as distinctive in this inquiry regarding their provisions. Thus, the focus on Cal-Vet loans highlights their specific terms that universally eliminate prepayment penalties, setting them apart in this context.