BOULDER, CO, Mar 29, 2024—For most of us, the idea of paying off our mortgage well in advance is elating. But before you make this big move, it's important to understand prepayment penalties, and what they could mean for you.
“Simply put, a prepayment penalty means you will have to pay the lender a percentage of the principal, or some other stated amount, if you decide to repay the loan early,” says FirstName} Boren, Broker Associate of RE/MAX of Boulder, Inc.. While this may seem wild (being charged for making your payment early!?), it's actually quite common.
“Some mortgages have prepayment penalties written into them,” explains Boren.
However, the prepayment clause is usually in effect for only one to three years and may be waived for special circumstances. Lenders impose the penalty to recover any losses related to your early payment.
If you are in the market for a home loan, Boren suggests you ask about prepayment penalties before signing on. If you are applying for a new loan, the penalty should be disclosed in the truth-in-lending statement.
Read the fine print and weigh all your options.
If you already have a home loan, call your lender or dig through your paperwork to spot any prepayment penalty clauses you may have missed.
For more information on your home loan, please contact RE/MAX of Boulder, Inc. at philboren@gmail.com, 303-441-5647, or RE/MAX of Boulder, Inc..
Phil Boren is a 26-year veteran real estate Broker and Realtor, specializing in consulting with buyers and sellers in Boulder, CO and along the Front Range of Northern Colorado. Held Real Estate Broker's license in Texas, California and Colorado; Managing Broker for over 200 agents and Brokers for Century 21 and RE/MAX franchises. Award-winning Realtor with experience in management, sales, marketing, relocation, appraisal, REO, BPO's, foreclosures, short sales; previously held the MAI designation from the Appraisal Institute. Experienced in both residential and commercial real estate and achieved the No. 14 individual ranking in the 5-state, Mt. States Region for RE/MAX International in 2001, based on sales volume. Received my BSBA in Finance and Real Estate from the University of Arkansas in Fayetteville, where he was a 4-year starter and 4-year football letterman for Hall-of-Fame coach, Lou Holtz.