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%
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$5.76
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15-Yr. fixed
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5.000%
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5.227%
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$7.91
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5.000%
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5.151%
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$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%
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$5.37
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5.125%
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5.213%
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$5.44
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3-Yr. fixed ARM
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4.750%
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4.879%
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$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%
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$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
Don't ever take a loan with one, now is a good example when the rates dipped down under 5.
Are rates that high already?
How things change so fast.
Johnathan
Thank for the update. It is good to see rates up a little, hopefully it will spark people to buy before the rates climb to high.
Jonathan - With such instability in the economy, rates have been extremely volatile since mid-2007. I've seen days where the rates would move 0.25% to 0.50% in a matter of hours. The mortgage backed securities market has lost ground 7 of the last 8 trading days, investors are attempting to slow volume as they do not have the manpower to handle the recent surge of business, fear of inflation looms as everyone speculates what the next relief package will contain. All of these factors are contributing to a rise in mortgage rates.
David - I hope so, though I fear it may discourage those who may feel they "missed the boat".