Question:

Can I avoid prepayment penalties on mortgage loans?

Answer:

Sometimes yes. Sometimes lenders will offer prepayment penalties on mortgage loans to prime borrowers in exchange for lower rate.

If low rates are important to you and the prepayment penalty on the home loan doesn't seem too expensive - no more than 2%, no longer than 3 years, and sale is allowed - it may be worth accepting it. Or, as a prime borrower you may never have to accept a prepayment penalty.

Prepayment Penalties on Subprime Home Loans

Due to the nature of subprime loans, prepayment penalties on bad credit mortgages will be quite more difficult to avoid. They are more expensive to originate and service, and it is well-known that the borrower will seek to refinance as soon as they can afford it. Therefore, expect a prepayment penalty in the agreement. The only thing the borrower could do about prepayment penalties on subprime mortgage loans is try to negotiate the terms, but don't hope for great understanding on the part of the lender.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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