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VIRGINIA STATUTES AND CODES
6.2-423 - (Effective October 1, 2010) Prepayment of loans secured by certain subordinate mortgages or deeds of trust; rebates for unearned interest.
§ 6.2-423. (Effective October 1, 2010) Prepayment of loans secured by certainsubordinate mortgages or deeds of trust; rebates for unearned interest.
A. Any borrower under any loan secured by a subordinate mortgage or deed oftrust on residential real estate, which loan is subject to the provisions of§ 6.2-327, shall have the right to anticipate payment of his debt in whole orin part at any time. If agreed to by the borrower, a lender may contract fora penalty for prepayment of the full amount of the loan if the prepaymentpenalty shall not exceed two percent of the principal amount prepaid, but noprepayment penalty shall be imposed if:
1. The loan is refinanced or consolidated with the same lender or asubsequent noteholder;
2. The loan is accelerated due to default;
3. A partial prepayment is made; or
4. In the case of an open-end credit plan, as defined in § 6.2-300, wherethere is a payment of the outstanding balance without a demand to release thesubordinate deed of trust or mortgage.
B. If interest has been added to the face amount of a note payable ininstallments, the borrower shall have the right to a rebate of any unearnedinterest. On loans with an initial maturity and corresponding amortizationperiod of 61 or fewer months that are payable in equal periodic installments,the rebate shall be computed in accordance with the Rule of 78 as illustratedin § 6.2-403. On loans with an initial maturity of more than 61 months, therebate shall be computed under a method at least as favorable to the borroweras the actuarial method.
C. The provisions of this section shall not apply to any loan made by (i) abank, savings institution, industrial loan association, or credit union or(ii) a seller in a real estate sales transaction who takes a subordinatemortgage or deed of trust on such real estate.
(1987, c. 622, § 6.1-330.85; 1990, c. 338; 1991, c. 171; 1998, c. 89; 2010,c. 794.)