What is a Pre-Payment Penalty?

When signing up for a†loan, you need to be wary of pre-payment penalties from some lenders. By offering a somewhat lower interest rate, borrowers will end up with a mortgage pre-payment penalty. This is a penalty for paying off your loan earlier. Though borrowers might save monthly with a lower rate, pre-payment penalties can end up costing you thousands of dollars.

Pre-payment penalties are used to protect loans long enough for lenders to recover some of the costs they gain from the original loan. These penalties also discourage refinancing your loan. Say your rates should decrease, lenders are promised a higher amount of the money that was lent. You wonít be able to refinance to the lower rate. Youíll continue to pay your current rate, while, in most cases, the lender gets the extra money, unless you decide to pay the fee.

At Sandton Partners LLC, we donít believe in pre-payment policies! If you are interested in a rehab or new construction loan, but not in pre-payment policies, contact us today at 508-265-2720 or by filling out an application loan.

Sandton Partners
PO Box 3192 AndoverMA01810 USA 
 • 508-265-2720

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>