Pre-payment penalties can be a nasty surprise for homeowners. Learn what pre-payment penalties are and how you can avoid them.
The fastest way to avoid a prepayment penalty on your mortgage is to simply check with your mortgage adviser! Your lender can explain what the mortgage program’s penalty may be and show you where to find it in your paperwork.
If you find a prepayment penalty you’re not happy with, your mortgage adviser can provide you with other loan options that don’t have a penalty. Better yet, you can find another lender who never adds penalties for paying off your mortgage early.
Your mortgage company should be forthcoming about all penalties and fees on your loan long before you get to the closing table. A prepayment penalty is yet another reason why it’s so important to be able to trust your lender.
How much is the penalty for paying off a mortgage early?
If you want to pay off your mortgage early, some mortgage programs will require you to pay a penalty. Certain loan program structure this penalty in different ways. They’re typically based on:
- A percentage of the loan’s remaining interest
- A percentage of the loan’s total remaining balance
- A flat fee
In general, trying to pay a mortgage early on in the loan will create a higher fee if you have a prepayment penalty.
Avoid prepayment penalties with The Wood Group of Fairway
Are prepayment penalties confusing you? We don’t like them either. At The Wood Group of Fairway, you’ll never deal with a penalty for paying off your mortgage early.