A prepayment penalty is a fee charged to borrowers that make full payment on their mortgage, or pay off a substantial portion (generally anything exceeding 20% of the total loan amount), ahead of schedule. This is a clause written into some contracts to protect the lender's book of business in exchange for providing a lower interest rate, or for providing financing to a high-risk borrower.
Prepayment penalties vary with different lenders, but generally apply to a one-, two-, three-, or five-year period of time. This fee can be expressed as either a specific number of months' interest or a percentage of the outstanding balance. A 'hard' prepayment penalty applies to either the refinance or the sale of a property. A contract written with a 'soft' prepayment penalty permits the borrower to sell their property without incurring a penalty, but does restrict refinancing for a set period of time. It is important for the consumer to know that a prepayment penalty is the borrower's choice and should never be considered a requirement!
Make sure you are working with a reputable loan professional who is aware of your long-term plans before consenting to sign off on an agreement that includes a prepayment penalty! Always ask for a written evaluation of your loan options.
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Conforming
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APR
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Payment per
$1,000
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Jumbo
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APR
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Payment per
$1,000
|
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30-Yr. fixed
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5.500%
|
5.635%
|
$5.68
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5.625%
|
5.716%
|
$5.76
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15-Yr. fixed
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5.000%
|
5.227%
|
$7.91
|
5.000%
|
5.151%
|
$7.91
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7-Yr. fixed ARM
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5.375%
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5.509%
|
$5.60
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5.375%
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5.465%
|
$5.60
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5-Yr. fixed ARM
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5.000%
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5.131%
|
$5.37
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5.125%
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5.213%
|
$5.44
|
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3-Yr. fixed ARM
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4.750%
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4.879%
|
$5.22
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5.125%
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5.213%
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$5.44
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5-Yr. Interest Only
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5.250%
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5.383%
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$4.38
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5.375%
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5.465%
|
$4.48
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*Rates are subject to change due to market fluctuations and borrower's eligibility.
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Superior Home Mortgage Corp. licensed in DE, FL, GA: Georgia Residential Mortgage Licensee #14511, MD, MI, NY: Licensed Mortgage Banker - NY State Banking Department, NC, PA, SC, VA: Virginia State Corporation Commission License # MLB-566, & DC. Superior Mortgage Corp. licensed in CT, MA: Mortgage Lender License # MC3208, NJ: Licensed Mortgage Banker - NJ Department of Banking, RI: Rhode Island Licensed Lender & Broker, & TN. SHM Mortgage Licensed by the New Hampshire Banking Department
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Mortgage Interest Rates*
Rates as of Friday, 23rd January, 2009:
4 comments • Karl Peidl - Accredited Loan Consultant • January 23 2009 02:18PM