re-fi--got a bitee-need advice - Posted by Jean (S. Cal)

Posted by CurtNy on July 24, 2002 at 11:43:00:

Ok Jean,
I’ll Bite, lets look at the numbers. Six months Prepay penalty ($1300x6) $7800 + closing costs $3000 = $10,800. If you’re saving $500/month is will take you approx 22 months to recoup those costs. After that you’ll be saving money. Do you plan to live there longer than 22 months, if so then good deal so far. Next, what kind of loan is this Fixed or Adjustable? If its fixed, and you plan to stay longer than 22 months then go for it. If its adjustable then you have a bigger decision to make. Best of luck to you.


re-fi–got a bitee-need advice - Posted by Jean (S. Cal)

Posted by Jean (S. Cal) on July 24, 2002 at 09:54:31:

Hello all,
I finally got a real bite on a m.b. who says they can re-fi my loan and roll all closing costs (2-3k) into the loan. I would be saving $500 a month – but I would pay 6 months pre-payment penalty-- which I think I could live with if my loan payment is $800 instead of $1300. I do realize there is more info you need if you care to comment. So if you don’t mind giving me your input here is my email: Thanks everyone.

Re: re-fi–got a bitee-need advice - Posted by Dave T

Posted by Dave T on July 28, 2002 at 12:10:17:

I have a couple of loans with prepayment penalties. However, in my case, each prepayment penalty has a timeline to expire.

In one case, my prepayment penalty was 6 months interest if I redeemed the note within the first six months. In another case, the prepayment penalty is a declining percentage that goes to zero on a three year sliding scale.

In both of these instances, I accepted the prepayment penalty (I got great terms otherwise) because my plan for the property was to hold for long term rental. My prepayment penalty timeline has long since expired on these notes.

While there is not an expiration on the prepayment penalty, my FHA loan limits the “penalty” to the full month’s interest due for the month in which I payoff the note.

In your case, when you stop to think about it, the prepayment penalty mostly reimburses the lender for the closing costs that you would have paid out of pocket anyway.

Based upon your expected exit strategy, you have to decide whether you can accept the prepayment penalty as a potential cost of business.

Re: re-fi–got a bitee-need advice - Posted by Al

Posted by Al on July 24, 2002 at 13:18:09:

Check a lot more lenders. When you save in one place
you`re paying it somewhere else.
Never accept a pre-payment penalty ever.
Go to some mortgage broker and have him analyze it
and try to beat it.