Some loans still have the pre-payment penalty for early payoff, but the length of time can vary. I have seen them from 2-5 years...if your loan is that new, it is unlikely you have a pre-payment penalty, as most lenders have done away with them. However, if you received grant money to purchase your home (i.e., from the city, etc) there is a possibility you have a graduated repayment plan if you sell the property within a specific time frame. In most cases, the longer you own the home the less you have to pay back, and it eventually goes away. The cities do this because they want to promote neighborhood stability and try to encourage homeowners to stay as long as possible.
For peace of mind, read through your loan documents yourself, or have a qualified professional read through them for you to eliminate any confusion.
Feel free to contact me if you have any questions.
Michele M. Hunt, GRI, CRS, SFR, CHS, e-PRO
Broker Associate, DRE # 00922428
1998 REALTOR of the Year
Realty Executives Platinum, Palmdale, CA 93551
(661) 733-5408 mobile
(888) 810-7497 fax
You can do one of two things to see if you have a pre-payment penalty. First, pull out your current loan documents and go straight to the Truth In Lending Statement. Towards the bottom of the page you will see several boxes. If the box that says "You may have a prepay penalty" is checked then you have a prepay. If the box that says "You do not have a prepay penalty" is checked then you do not have a pre-pay. Second, you could simply contact the Lender who carries your trust deed and ask them if you have a pre-pay and if so what would be the total cost. I hope this helps. Good luck!
All the answers below answer your direct question well - but the question you might want to think about is how will paying off my loan affect my mortgage interest deduction and the taxes that you pay to the IRS and Franchise Tax Board.
You may not be aware how much your Mortgage Interest Deduction affects your bottomline of your taxes, please talk with your tax preparer and let them know what you are planning on doing and make sure that the end result is what you want.
I hope that you are able to obtain the home of your dreams, and make sure that when you sign the loan documents on your "certain home" that there is no PrePayment Penalty hidden in the Note or Truth in Lending Disclosure documents.
Best of luck,
Tamara Stoebe, REALTOR, GRI, e-PRO, CHS, QSC
DRE License #01827461
Prudential Troth REALTORS
1801 W. Ave. K
Lancaster, CA 93534
Cell: (661) 466-6849
Fax: (661) 422-3006
Prepayment penalties comes from the lender, not any regulatory agency. Review your loan docs or contact your lender if you're not sure as it all depends on the lender and type of loan. Some have no prepayment penalty at all, some for a short period like 6 months, and I just came across one that had a 4 year no prepayment clause.
Sometimes it's worth the penalty if you're making it up on something else, but you should consider this on your new loan with regards to how long you think you'll be there.
Lance King/Owner-Managing Broker
You could possibly have an older loan that has a prepayment penalty. Your best bet be to contact your lender to get your answer. You could review your loan documents as Richard suggested, but keep in mind that you could have missing documents.
Roswell Moore, CMPS
Certified Mortgage Planner
We are a Direct Lender, Mortgage Bank where we originate, process, underwrite and fund, in-house, FHA (w/a 580 score), 203k, VA, USDA, Jumbo, Conventional, loans to Canadians, Australians & other Foreign Nationals, on time.
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