Question:

How to deal with subprime mortgage loan prepayment penalty?

Answer:

A subprime mortgage loan prepayment penalty usually cannot be avoided. Subprime loans are risky for the lender, therefore interest rates are higher and currently the secondary market mortgage investors are skeptic towards subprime ARM loans, meaning subprime lenders can't sell those loans and are cash-limited.

It is unlikely that a bad credit lender will not use at least a 3-year prepayment penalty and there is usually little borrowers could do to avoid bad credit mortgage prepayment penalties, if subprime lending is their only chance to getting a loan.

Prime mortgage loans prepayment penalties can be negotiated.

Prime borrowers, unlike those with marred credit, can usually opt whether or not to take a home loan prepayment penalty. Usually, mortgages with prepayment penalties are more desirable to large lenders and the borrower may get an interest rate reduction.

To utilize this mortgage prepayment penalty option to win the rate down, borrowers should know about it in advance and ask the lender what they offer in exchange for the prepayment penalty inserted in the mortgage agreement. Some lenders won't pass the benefit of accepting prepayment penalty to the borrower; others will not use any on prime rate loans.

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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