From the category archives:

Refinancing

October 30, 2008

My mortgage carries a prepayment penalty. Does it mean I can make no extra payments at all without being penalized?

You can make extra payments whenever you feel so, but the amounts will be usually limited to the maximum of 20% of the original loan’s balance per year while the penalty period lasts (usually the first 3 or 5 years). Only amounts above the 20% are penalized. When the prepayment penalty period is over you [...]

October 30, 2008

What is the difference between a hard and a soft prepayment penalty?

A penalty that applies to refinancing only is a soft penalty; a penalty that applies to both refinancing and a home sale is a hard penalty.

October 30, 2008

Should I agree to have a prepayment penalty included into my contract?

If your credit score is not very good, I am afraid, you don’t have very much of a choice here. You are forced to do whatever your lender tells you to in order to get the loan. However, try as hard as you can to avoid the hard penalty . Borrowers with a good credit, [...]

October 30, 2008

How much is an average prepayment penalty?

The concrete amount is individual to each case, of course. It depends on the penalty terms agreed upon in the mortgage contract. Sometimes it is a fixed amount (an equivalent of six months of interest, for instance), or a percentage of the outstanding balance, fixed (around 2%) or regressive. For example, the penalty for prepaying [...]

October 26, 2008

Prepayment Penalty

A prepayment penalty is the jack-in-the-box of the mortgaging world. Most times it is equally annoyingly unexpected (for the borrower), but unlike the dumb toy, it may cause people to lose their money, not just make them produce a polite squeak of a laugh. A prepayment penalty, if included into a mortgage contract, states that [...]

August 30, 2008

Bridge Loan

Today’s article explains the equity way to close the financial gap between the new and the old homes’ mortgages. A lot of people count on the money they are going to get from selling their current home to make a proper down payment on their new home and start a new mortgage. Unfortunately, many properties [...]

July 29, 2008

ARM Rates Are Skyrocketing! I don’t want to lose my home!

This very unpleasant situation does require a considerable financial effort on your part, but it can be resolved eventually to your advantage. The two most reliable ways are: to make extra payments towards the Principal, or/and refinance into a Fixed Rate Mortgage. How do extra payments help? The amount paid as Interest is a percentage [...]

April 30, 2008

Refinancing (Part III)

Today I suggest we talk about the so-called “no-cost” refinancing. First of all, this commonly used name for a refinancing option one can find very useful under certain circumstances is in fact rather misleading, because: No-cost does not mean free from any costs; No-cost refinancing helps you only with the Non-Recurring Closing Costs; No-cost refinancing [...]

April 17, 2008

Refinancing (Part II)

 Why do people refinance? All for different reasons, of course, but the most common ones are: To obtain a lower interest rate, To build the equity of their property faster, To change the type of their loan, To take advantage of an improved credit rating, To get some cash out of the equity already built [...]

April 7, 2008

Refinancing (Part I)

Refinancing your mortgage means basically that you stop your current mortgage and take a new one in its stead on better terms. The goal is to save money by getting a better deal on the home mortgage loan. People tend to refinance when mortgage market interest rates drop below the lowest rate they can have [...]