Blown Mortgage - Latest Comments in Choosing a Pre-Payment Penalty?

Re: Choosing a Pre-Payment Penalty?

Guest — Tue, 20 Sep 2011 06:52:39 -0000

Thanks for the information in this blog.

Re: Choosing a Pre-Payment Penalty?

Eddie — Tue, 06 Jul 2010 10:20:10 -0000

Hi Morgan, I have 2 mortgages (A and B) at very high interest rates (8.5%). I have the option of transferring Mortgage A to one of 2 cheaper banks - 1 has a 5 year prepayment penalty of 1.6% but has an introductory low interest rate of 5.99% (but this goes up to 6.5% after a year). The other bank has no prepayment penalty but has an interest rate of 6.75%. There are substantial savings to be made on the monthly payment in the first year if I go with bank 1. But Bank 2 covers me if I need to sell suddenly - eg if I lose my job. The reality is though that unless there's an emergency I'm not going to make any prepayments on Mortgage A because its better for me to prepay Mortgage B which is more expensive. Problem is Mortgage B only allows me to prepay once a year with a 1% penalty. All v. confusing, I really don't know which to go for - Bank 1 (1.6% prepayment penalty for 5 years; lower introductory rate) or Bank 2 (no prepayment penalty but higher interest rate). Any tips? Ed.

Re: Choosing a Pre-Payment Penalty?

Morgan Brown — Mon, 08 Jun 2009 21:32:26 -0000

Hi Ann,

It really depends on your mortgage note. I'm not a legal expert so I can't give you the right answer. I would talk to an attorney that specializes in TILA and real estate law and inquire with them. Loans that are deemed predatory have prepayment limits that are restricted to 36 months. However, an attorney can give you more insight. Good luck!

Re: Choosing a Pre-Payment Penalty?

ann mendoca — Mon, 08 Jun 2009 14:20:02 -0000

I have a 5-year prepayment penalty. I am four years into the five. I want to refinance and cannot even through my present lender because all I have is a servicing company. Don't really know who my lender is. I live in California. Is this legal in California?