Refinancing your mortgage can save you money if you do it properly. There are a number of mistakes homeowners make that eat up their potential savings; many homeowners don’t even know and blindly go about their business, overpaying the mortgage lender month in and month out. Prepayment penalties are one such homeowner mistake; here are tips to help you avoid overpaying for your new mortgage loan.
Prepayment penalties are a fee the lender includes in your loan contract. If you refinance or sell your home before the expiration of the penalty, you will be required to pay the fee. These penalties can be steep; the lender may require you to pay up to six months worth of interest based on 85% of the loan amount. If you are a homeowner with good credit there is no reason to accept a mortgage with a prepayment penalty.
If you have poor credit you may have to accept a mortgage with a prepayment penalty; however, you should try and negotiate for a short penalty that will allow you to refinance after a period of two years. This will allow you to rebuild your credit and not pay the penalty when you are ready to refinance the loan. If you are considering refinancing your existing mortgage make sure that you do not have a prepayment penalty in your loan contract; if there is a penalty in your contract contact your lender to find out how much you will have to pay before deciding if refinancing is worth your while.
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Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of “Mortgage Refinancing: What You Need to Know, " which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit .
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Refinance Mortgage Prepayment Penalty