Rhode Island prepayment penalty rules

Rhode Island permits prepayment penalties on first-lien mortgage loans for dwellings with up to 4 units, but with restrictions. Under the default rule (subsection (a)), a penalty of up to 2% of the balance due may be charged only if prepayment occurs within the first year; after one year, no penalty is allowed. Alternatively, for non-purchase money loans only (subsection (b)), a lender may impose a prepayment penalty for up to 60 months, provided the terms are prominently disclosed and the borrower consents, and the lender also offers a similar loan product without such penalty under subsection (a).