Borrowers are coached to ask several questions when interviewing potential lenders. "What is your rate today?" and "How much do I need for a down payment?" and other common queries abound. A common question that is asked is rarely needed any longer.
"Is there a prepayment penalty?"
A prepayment penalty is an amount charged to a borrower should the borrower retire the loan before a certain period of time. For example, a lender will offer a slightly lower interest rate if the borrower promises to keep the loan for at least three or maybe five years. If the borrower agrees not to pay off the loan for the agree upon period then the lender will offer a lower rate.
Should the borrower break the promise and refinance that loan after one year a penalty would be imposed. A common penalty in such a situation is 20 percent of the amount the lender would have otherwise received over the agreed upon time frame. Or simply something such as one percent of the outstanding loan amount. Such arrangements weren't' uncommon in the mid 1990's when rates were much higher than ทาวน์เฮ้าส์มือสอง ราคาถูก they are today.
But then the mortgage crisis hit and the federal government took over. Prepayment penalties are kaput. History. Mortgage toast. In 2010 several new mortgage rules were put into place to help prevent another housing crisis and the elimination of prepayment penalties was one of the first on the list to go. Still however, the question still keeps popping up from a borrower and lenders enthusiastically tell respond with, "And that's another great thing about our bank... none of our loans carry prepayment penalties!"
And neither do any other loans in the marketplace today.
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