What is hard and soft mortgage pre-payment penalty?
Answer:A mortgage pre-payment penalty is a clause in your mortgage agreement stipulating the conditions of exit from the home loan. The home loan prepayment penalty can be a hard figure, as $10,000 cash; or percentage of interest or percentage of the outstanding loan balance.
A hard mortgage prepayment penalty refers to sale and refinancing; a soft penalty refers to refinancing only. Usually, up to 20% of principal is allowed to prepay in any year, but not every lender will support this.
What is important about mortgage pre-payment penalties?
Mortgage prepayment penalties apply usually for the first several years (up to five) of the loan. It is sometimes reasonable to accept a soft prepayment penalty for a rate decrease. However, hard mortgage prepayment penalties are not recommended to accept.
Subprime mortgage loans usually have prepayment penalties.
For subprime loans, a costly mortgage prepayment penalty may tie you up more than you would like. A prepayment penalty of $10,000 and more for a bad credit loan at 11% is not uncommon. Due to high origination and loan costs, a subprime lender will charge a penalty. The only thing a borrower can do to offset the effect is to name their terms and stand up for them.
Link:
Link:
Link: See All 3 National Credit Scores & 3 Reports Instantly, Online & Free
| Not at all | Definitely |
Mortgage QnA is not a common forum. We have special rules:
- Post no questions here. To ask a question, click the Ask a Question link
- We will not publish answers that include any form of advertising
- Add your answer only if it will contrubute to the quality of this Mortgage QnA and help future readers
Common misspellings: mortage and morgage