This article deals with some rarely discussed mortgage details that can have a major financial impact if youre not careful. For starters, theres Prepayment Penalties. These penalties can cost you a bundle and theyre often overlooked during the origination of the loan as well as the signing. Many mortgage brokers know perfectly well the program theyre putting you in has a Prepayment Penalty and they avoid the topic as much as possible. So a lot of people have penalties and dont even realize it.
This situation just happened to a client of mine who wants to refinance OUT of an adjustable rate mortgage and INTO a fixed program. We sat down to review the options and I asked to review her existing mortgage Note and thats when we discovered the penalty. She had no idea. That Prepayment Penalty would cost her almost $14K if we went ahead with the refinance. Now, in some circumstances, it may still be worthwhile doing the transaction. For example, if rates were rising quickly or if fixed interest rates took an unexpected dip, presenting an unusual opportunity, it might still make sense to do the deal. But in her situation, the breakeven would be too long to justify the added...
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