ILCS » Chapter 205 · Act 635
Illinois Compiled Statutes

205 ILCS 635/5-8 (2026)

Prepayment penalties

✓ current as of May 2026
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(205 ILCS 635/5-8)
    Sec. 5-8. Prepayment penalties.
    (a) No licensee may make, provide, or arrange a mortgage loan with a prepayment penalty unless the licensee offers the borrower a loan without a prepayment penalty, the offer is in writing, and the borrower initials the offer to indicate that the borrower has declined the offer. In addition, the licensee must disclose the discount in rate received in consideration for a mortgage loan with the prepayment penalty.
    (b) If a borrower declines an offer required under subsection (a) of this Section, the licensee may include, except as prohibited by Section 30 of the High Risk Home Loan Act, a prepayment penalty that extends no longer than three years or the first change date or rate adjustment of a variable rate mortgage, whichever comes earlier, provided that, if a prepayment is made during the fixed rate period, the licensee shall receive an amount that is no more than:
        (1) 3% of the total loan amount if the prepayment is
    
made within the first 12-month period following the date the loan was made;
        (2) 2% of the total loan amount if the prepayment is
    
made within the second 12-month period following the date the loan was made; or
        (3) 1% of the total loan amount if the prepayment is
    
made within the third 12-month period following the date the loan was made, if the fixed rate period extends 3 years.
    (c) Notwithstanding any provision in this Section, prepayment penalties are prohibited in connection with the sale or destruction of a dwelling secured by a residential mortgage loan.
    (d) This Section applies to loans made, refinanced, renewed, extended, or modified on or after the effective date of this amendatory Act of the 95th General Assembly.
(Source: P.A. 97-849, eff. 1-10-14 (see Section 10 of P.A. 97-1159, 78 Fed. Reg. 6855, 6857, 78 Fed. Reg. 10695, 10696, and 78 Fed. Reg. 44685, 44686).)

    
Notes of Decisions
Cited in 1 case (1 in the last 5 years), 2025–2025 · leading case: Abdou v. Citadel Servicing Corp. (N.D. Ill. 2025).
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Abdou v. Citadel Servicing Corp. (N.D. Ill. 2025). · cites it 3× “205 ILCS 635/5-8 (“2% of total loan amount if prepayment is made within the second 12-month period following the date the loan was made.”
— 205 ILCS 635/5-8(a) — 1 case
Abdou v. Citadel Servicing Corp. (N.D. Ill. 2025). “205 ILCS 635/5-8 (“2% of total loan amount if prepayment is made within the second 12-month period following the date the loan was made.”
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