Refi during a pre-pmt penalty in an ARM

[RWC]

California R.E. Law - I have a 6 month adjustable rate mortgage with a 3-yr prepayment penalty. Which at face value means I'm stuck with an ARM for the next 3 years which is probably going up and I can't get out of it unless I pay a penalty. HOWEVER, I have been told that at each adjustment period (every 6 mos) beyond the initial fixed period I have a "90-day" window in which I may refinance my loan without suffering a pre payment penalty (via some loophole).

Heard of this before?

Thx

[ice5146]

Check your Pre-Payment Rider Disclosure you signed at Settlement. It will be with the Note. I'm sure there's a clause contained in the Rider specificing you can convert to a Fixed Rate w/ no penalty assuming you meet certain criteria. Since the 6 month LIBOR Index increased by over 3 percentage points in a year, you may want to consider this option. If this is not an option for you to convert to a Fixed Rate, you should consider paying the pre-payment penalty and refi out. Your property has probably appreciated enough in value since you took the loan out to cover the PPP anyway. Food for thought.