Mortgage Prepayment Penalties - Just Say No
One of the most common terms found in a new home loan is a prepayment penalty. This type of penalty says that if the
borrower pays off the loan early, commonly during the first five years of the loan, then the borrower will be responsible for
paying an additional amount of money, typically about six months interest on 80% of the mortgage balance. Sub-prime market loans
will typically carry prepayment penalties more than standard mortgage loans.
You may plan on keeping the house for the entire duration of the prepayment penalty, and be tempted not to worry about it
much. But sometimes life circumstances change, so it's wise to avoid any type of prepayment penalty if you can. A typical
prepayment penalty might equal five months worth of monthly loan payments, so it's worth checking on. Of course, you should always
ask (before you sign) if a new loan has a prepayment penalty. In fact, ask the lending officer to point out to you in the document where a prepayment penalty is discussed.
Most items in a loan are subject to negotiation. If you
haven't signed loan papers yet, and you find that your loan has a
prepayment penalty, you might offer to pay an additional closing
point or so to see if it can be removed. The key at this stage is
that if you agree to the prepayment penalty, you should try to
find ways to reduce either the amount, the term, or both as much
If you already have a loan, you are bound by the terms of the
document, unless you can negotiate them. There are perfectly
legitimate reasons why you may want to pay off a note early -
most often, due either to refinancing or selling the house. You
may be able to contact your lender to see if they will waive the
prepayment penalty if they are able to provide refinancing. If
interest rates have dropped a lot, and you can't get out of the
prepayment penalty, it may be worth rolling that amount into a
new loan. And of course, try to get the new loan without a
About The Author
Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the
latest on personal finance, debt elimination, budgeting, credit cards and real estate.
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Here are some mortgage tips that can help you obtain a
mortgage with less hassle, and at a lower overall cost:
Determine how much home you can afford. Based on your
income and any long term debt, know the maximum payments
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History? How Financing and Buying a Home Can Help You
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Financing and buying a home can help improve your financial
situations, especially if you have a bad credit history.
Adding a mortgage payment to your monthly expenses seems
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but in the long run a mortgage can save you money on your
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for Closing Costs
Closing on a property is a very challenging time for a
would-be homeowner. Being informed, either through your
mortgage broker, your real estate agent, or through self
knowledge is the best thing you can be when going through
Be Prepared With Your
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A home equity loan can be an excellent way to obtain money
in order to pay off high interest bills or consolidate your
current debt into one monthly payment. A home equity line
of credit is a form of revolving credit in which your home
serves as collateral.
Mortgage Sales Hit
The housing market has been buoyant over the past few
years, but mortgage providers and first-time buyers are
both now facing a tough time. Following announcements from
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in the total number of UK home-buyers, and a declaration
from the Financial Ombudsman Service (FOS) that the number
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hit record levels, it seems that mortgage lenders are
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Your search for a mortgage isn't leading results. Check for
Follow A Few Simple
Steps To Make Shopping For Your New Home Loan A Little
It is likely to be one of the largest purchases of your
life, and it can be extremely nerve racking and
overwhelming. Buying a new home! Whether you are buying
your first home, or moving to a new home; purchasing a home
and shopping for home loans is a major decision that
requires a lot of time and energy.
Mortgage advice overwhelming you? Many people get advice
from everyone on the planet when they talk about purchasing
a home. People tell them their version of advice on most
important factors and expect the potential home buyer to do
as they have instructed.
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