epaying your mortgage prepayment penalty can be charged
before it comes due seems in two ways: as a percentage of
like a good idea. the balance of the loan at the
time of repayment or based on the
Not only do you own your home in number of months remaining in the
a shorter amount of time, you loan life.
also eliminate a significant part
of your debt in a shorter period Mortgage prepayment penalties can
of time. be charged in the event you sell
your home or refinance your loan.
While mortgage prepayment works If your mortgage contract
out in your favor, the same isn’t included a prepayment penalty, it
the case for the lender. Lenders will be considered hard or soft.
generally despise mortgage A hard penalty says that you
prepayment. When you pay your cannot do either of these
mortgage in a shorter period of transactions without incurring a
time than expected, the lender penalty. You are only subject to
receives less in interest than a soft mortgage prepayment
expected. The sooner you pay off penalty if you refinance the
your mortgage, the lower the mortgage.
amount of interest the lender
received. For this reason, many Penalties can decrease and even
lenders charge a mortgage be eliminated over time. Usually
prepayment penalty. after five years, the mortgage
prepayment penalty is removed
The mortgage prepayment penalty altogether. You can make a
is a stipulation in your contract payment up to 20% of the loan
that states you will pay a balance in any single year and
penalty if you repay your avoid receiving a mortgage
mortgage entirely. The mortgage prepayment penalty.
penalty. Lenders realize that if
In some cases, prime borrowers, your credit improves you are
those with good credit ratings or likely to refinance to obtain a
high down payments, or both, are lower interest rate. This, of
offered the mortgage prepayment course, presents a loss for the
penalty option to decrease their lender.
interest rate which results in a
lower monthly mortgage payment. So, to prevent this kind of loss,
lenders to sub-prime borrowers
If you are extended such an impose a penalty on borrowers who
option, it is good to consider might refinance in the future.
the importance of the decrease in You might not be able to
mortgage payment to your negotiate out of the penalty
finances. Other factors that come altogether; however, you can
into play are the length of time negotiate some of the terms.
the mortgage prepayment penalty Insist that the mortgage
remains in effect and whether it prepayment penalty only apply for
is a hard or soft penalty. Hard a certain amount of time and that
penalties should be avoided it not apply to a sale of the
because you can never be sure home.
when you are going have to sell
your home. Before accepting a mortgage
prepayment penalty from a lender,
If you are a sub-prime borrower, make sure the terms of the
with less than favorable credit penalty favor you as much as
or a low down payment or both, possible.
the lender may require you to
have a mortgage prepayment
About the Author:
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Gerald Mason
Article Source: www.iSnare.com 
