VACAVILLE, CA, Apr 27, 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} Sue and Steve Kappel, Broker/Owners of Coldwell Banker - Kappel Gateway. 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 Sue and Steve Kappel.
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, Sue and Steve Kappel 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 Coldwell Banker - Kappel Gateway at info@kappelgateway.com, 707-427-5344, or Coldwell Banker - Kappel Gateway.