Ed, please a prepayment chrg question? - Posted by S.Autumn

Posted by S.Autumn on June 14, 2001 at 10:47:31:

I’ll be in touch about my progress.
Sincerely
Sheila

Ed, please a prepayment chrg question? - Posted by S.Autumn

Posted by S.Autumn on June 14, 2001 at 01:08:28:

Ed and All,
The house is going to Trustees sale July 18. I’m finding solutions to help the owner/seller. She believes the following rider makes it “impossible” to sell the house in the first Three years. The prepayment rider states; "If the aggregate amount of principal prepaid in any twelve month period exceeds twenty percent (20%) of the original principal amount of this Note during the first Three years commencing from the date of this Note, then as consideration for the acceptance of such prepayment, and in addition to any other sum payable hereunder, I agree to pay the Note Holder a prepayment charge equal to six months’ interest on the amount of any prepayment exceeding twenty percent of the original principal loan amount."
My question: How do I calculate the amount equal to six months interest? Original principal $80,000. Loan amortized 15 year balloon from sale date May 2000 at 10.25%. I get that 20% of 80,000 is $16,000 and 80% is 64,000 but lost with how to find the six month interest. If Any of this is unclear I will be more than happy to explain further.
Sheila

Re: Ed, please a prepayment chrg question? - Posted by Ed Garcia

Posted by Ed Garcia on June 14, 2001 at 09:11:58:

Shelia,

A rule of thumb is to take your monthly payment X 6 =. Then multiply that by .80 and that should give you your prepayment penalty charge.

Ed Garcia

Re: Ed, please a prepayment chrg question? - Posted by Angel Gutierrez

Posted by Angel Gutierrez on June 14, 2001 at 08:47:43:

I have one of these.
Last year, in my haste to aquire, aquire, aquire; I ran across a family that gave me a house with a 14.1% interest note attached. Being the pinhead, I said sure and went ahead with the deal(Don’t do it Angel). I figured (oh no!), I’ll paint the house and sell and be done (yeah right). I reinstated the loan($5,500) and spent another 5k in fix-up. Well, one morning, 2am, I woke up suddenly and it occurred to me that I never READ the mortgage documents through. So here I go, I can barely see, get the paperwork out and there before my bloodshot eyes…PREPAYMENT PENALTIES. Great!.. I tried figuring it out but could never actually get a concrete figure. Needless to say… I was not happy. Later, after being up all night, I called the mortgage company and asked for a payoff, they were real quick to point out the penalty to the tune of 7k. So what now? Well, knowing what I know now,I could have paid off the note without penalties just before the foreclosure(the bank would have settled for much less I found out later). But the damage was already done.I did an owner carry back with 5k down and am waiting until December(when the penalty expires) to cash out. I won’t see a dime of profit on this deal until then. Sooo… the moral of the story is…
I think you get the picture.
We all make mistakes, and I’ve made lots of them, and an interesting thing happens…we learn and grow. Some people think that I’m a self-righteous S.O.B. know it all…yeah well, when you’ve been burned enough by your own stupidity and compulsion, you tend to be a little cautious in your future deals and when you see than deal that burned you on somebody elses’ table, you want to help and sometimes it’s misconstrued, then later it’s…how did this happen to me? (rolling my eyeballs)
You’re wise to post this stuff on this board for input. You’re already ahead of the game!
Go get’em and let me know what happens!

Angel
Dallas, Tx

Re: Ed, please a prepayment chrg question? - Posted by Nate(DC)

Posted by Nate(DC) on June 14, 2001 at 08:28:46:

If the loan were to be completely paid off, the prepayment penalty due would be:

((outstanding balance at the time of payoff)+(principal repaid in the previous 12 months)) * .05125

NT

Re: Ed, please a prepayment chrg question? - Posted by Vernon

Posted by Vernon on June 22, 2001 at 09:47:17:

Angel,

In reference to this part of your post:

“Well, knowing what I know now,I could have paid off the note without penalties just before the foreclosure(the bank would have settled for much less I found out later).”

How would you do it the next time?