Horse Property at 158904 W North River Road Prosser, WA 99350 Home For Sale | $385,000. | MLS #251017 Perfect Prosser horse prop... Read More
Repercussions of Prepayment Penalties
When a home buyer gets involved with buying a home, thoughts usually tend to center on staying in that home for a lengthy period of time, building both a family and equity. However, as we all know, your life can change in an instant and you never know when the next great job offer or life change will be presented, prompting you to leave town and seek a new beginning. It is those opportunities that prepayment penalties prey on and you should be well aware of what you’re getting in to if they are a feature of the mortgage on your home.
Understanding Prepayment Penalties
Prepayment penalties typically state that if you decide to pay off the balance of your mortgage within a period of time (generally a few years from the start of the mortgage), you agree to pay a sort of penalty that is usually derived as some percentage of the interest on your mortgage over a period of time. The penalties serve loan agencies well as they seek to get some profit out of your loan even though an owner has decided to end it early, but they do a disservice to the home owner.
Naturally, you should be aware of all of the aspects of your home loan, but the section discussing prepayment penalties is perhaps one area to pay special attention to. These penalties can cost as much as a handful of monthly payments on your home, so they do represent a significant cost. Every loan is negotiable and it is up to you and your realtor to make prepayment penalties at the very least a topic of discussion.
Much of the time, eliminating the prepayment penalty from your loan may be too difficult or the bank may ask for too much in return, so negotiating down the lengths and amounts involved could be a workable solution for both sides. Negotiating a smaller window of penalty or a smaller amount of penalty can at least make you feel that you’ve addressed the situation and if you negotiate down the window enough, can probably make you feel safe from having to pay a penalty.
Take Advantage of Time Window
If you are currently paying a mortgage with a prepayment penalty and have a lot of that time window left to go, you may think about getting creative with how you deal with the penalty should you have to endure it. If you have a new home with new financing set up, you can elect to roll that prepayment penalty cost into the amount of your new loan to possibly get interest benefits if rates have gone down.
You can also contact your lender or real estate agent if the window is close to expiring but not fully up to see if the cost can be waived and, if so, what the bank would want in return. Perhaps financing a new property through the same bank will entice them to waive the prepayment penalty in favor of getting your repeat business. You’ll never know until you ask or your realtor pursues the matter, so it is always best to at least give it a try.
As with every step of the home buying and home ownership process, having full information will leave you better equipped to make decisions in the future. There are hundreds of little items that must be at least thought about and the presence of a prepayment penalty in your mortgage is one such item. Ask the right questions and make some attempt to negotiate down the terms of the penalty if your lender insists on making prepayment penalties a part of your home’s mortgage. You’ll be glad later if a life-changing opportunity comes along later and you are free to pursue it without enduring the added cost of mortgage prepayment penalties.
Call us, 509.438.9344, Email us, or fill out the contact form below.
We respond right away! -Colleen Lane, Realtor®
Latest From Our Blog...
Kennewick, Richland, Pasco, & West Richland Washington Virtual Open Houses in the Tri-Cities MLS MarketOne positive outcome fro... Read More
Listing Your Home to Sell | What We Will Do For You When Selling Your Home on the MLS When you list your Tri-Cities Washington o... Read More
2505 West 32nd Avenue, Kennewick 99337 Home For Sale | $324,900. | MLS®# 250031 Well maintained and upgraded 2072 ... Read More
6106 Panther Lane, Pasco, WA 99301 Home For Sale | $275,000. | MLS# 250418 West Pasco 4 bedroom, 2 bath, 1,481 sq ft home built ... Read More
Helping Home Buyers | What We Do For You Local Tri-Cities Washington Husband/Wife real estate team offering all sorts of advanta... Read More
Are you looking for something to do this weekend in the Tri-Cities Washington or in the surrounding area? Then check this out! We h... Read More
105 South 716 PR SE, Kennewick, WA 99338 Southwest Kennewick Home For Sale | $515,000. | MLS# 250251 Situated on over a half-acr... Read More
266 Greenview Drive Richland WA 99352 Home For Sale | $545,000. | MLS# 247909Beautifully elegant well-maintained large 4633 square ... Read More
5112 Lucena Drive Pasco WA 99301 Home For Sale SOLD FOR FULL ASKING PRICE | MLS® #249967 | $369,000. Comfortable W... Read More