How to Avoid Prepayment Penalties on a Home Loan

Series Summary

Buying a home is a major milestone in life. It’s one of those things to get excited about and look forward to for years. Home ownership is a good investment, so start scouting for that perfect little fixer upper in a middle class neighborhood. In this free video series, let a licensed mortgage broker explain all about home loans and equity. Learn about avoiding prepayment penalties on home loans, building equity, calculating home equity loans, figuring home equity and finally, obtaining a construction loan to build a dream house.

Video Transcript

"Hi so you are thinking about getting a mortgage or going to get a mortgage but you heard the prepayment penalties from your mortgage broker or from your lender and you want to avoid that. No problem I can certainly tell you how to do that. My name is Adriel Torres and I'm the owner of ultimate credit today dot com. Now what a prepayment penalty is, is basically if you pay the loan before it's due then they'll charge you a certain amount of money, whatever that may be. And in order to avoid that, most lenders will have a charge up front that you can actually buy the prepayment completely off the loan. And what I mean by that is usually a half a point or a point to buy the two years to three years. If you have a two year prepayment penalty it's going to cost you one point of the loan amount to buy it, and you think you are going to be in the property less then two years and it's obviously wise to do so. But if you think you are going to be in the property for longer then that, then there's really no reason to buy down the prepayment penalty. So again to buy down a prepayment you may have to pay up front and it also depends whether you are going to stay on the property for longer then what the prepayment amount is. So again that's how you buy out the prepayment, you have to pay up front to buy it down. Again my name is Adriel Torres I'm the owner of ultimate credit today dot com. Thank you very much."