What Are The Pre-payment Penalties And Why Should I Pay Them?
A pre-payment penalty is a fee levied upon the borrower for paying off his mortgage early. A pre-payment penalty is generally attached to a loan in barter for a slightly lower rate. Pre-payment penalties are good for lenders by discouraging refinancing if rates happen to fall. Pre-payment penalties are in most cases a percentage of the outstanding balance at the time of the pre-payment. They can sometimes even be the interest of a specified number of months. However, loans differ on how they structure the pre-payment penalties. We strongly suggest you think twice before agreeing to a pre-payment penalty clause. No matter how tempting that lesser rate of interest, you will most probably be better off paying the higher rate in the long run. Why? Because statistics show it’s likely you’ll be moving or refinancing long before you’ve paid off your mortgage. At Speed Track Loans it is our policy to not have any pre-payment penalties.