Financing in Houston>Question Details

Trulia Houst…, Other/Just Looking in Houston, TX

Is there a penalty for paying off a mortgage early? If so, why?

Asked by Trulia Houston, Houston, TX Tue Apr 30, 2013

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6
Some loans may have a pre-payment penalty. Read your loan documents to see if you have a PPP. Or you can simply call your lender and ask them. Some lenders give a better rate if you take their PPP.

Have a great day;

Christina Solorzano;
CEO & SR Credit & Mortgage Consultant of
Everlasting Credit
Ex-Mortgage Broker of more than 10 years
http://www.everlastingcredit.com
0 votes Thank Flag Link Mon May 6, 2013
Please check your Deed of Trust and Note to see if there is a Prepayment Penalty. The vast majority of residential mortgages do not have a penalty to early pay off. Only mortgages, which typically contained a penalty were Sub-prime mortgages.

Paying off a mortgage early invovles many factors. If you are nearing the end of the mortgage and most of the tax deductions for interest are trivial, then pay off the mortgage. If you are in the first few years of a mortgage and your rate is over 4%, then a refinance may be an option.

If your only asset is your home, it would be prudent to invest the money in other investments. It is not wise to place all your money in one asset. Cash could be very important and getting it back out of the home will cost you dollars.

Neal Davis
Republic State Mortgage
Senior Mortgage Banker
NMLS: 213826
Direct: 713-579-7810
0 votes Thank Flag Link Tue Apr 30, 2013
Although it is not advisable(from a financial planners point of view) to pay it off.... Most loans do not have the pre-payment penalties any more.

Look at your Promissory Note http://www.ntreisinnovia.net/cgi-ntr/BR_login?0501134
0 votes Thank Flag Link Tue Apr 30, 2013
At today's rates, why would one want to? It's unlikely that anyone would be getting a 3% guaranteed return on any investment (which would ultimately be taxable anyway), and mortgage interest is deductible, so the net is effectively less than the rate. The only instance that would seem feasible is at the end of the loan, when the payment is largely principle. Since most home loans do not include a prepayment penalty ... hey, whatever works.

Al Geffon
(713) 213-6350
al@geffon.net
Web Reference: http://www.har.com/algeffon
0 votes Thank Flag Link Tue Apr 30, 2013
These types of penalties are more commonly found in commercial loans. The deed of trust would need to be reviewed to be certain, although as Tina said, it's not very common in residential loans.
0 votes Thank Flag Link Tue Apr 30, 2013
That depends on your mortgage terms. Most don't have such a penalty. It's there to protect the investor's returns.
Web Reference: http://www.archershomes.com
0 votes Thank Flag Link Tue Apr 30, 2013
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