How Do You Calculate A Prepayment Penalty On A Mortgage?
Prepayment penalties are a charge on mortgages for an early payoff. These are more typical with sub-prime mortgages as finance companies will not reap interest payments if the mortgage is paid before the termination date. To calculate the penalty, you’ll need only your original closing documents. Search through your closing documents. You are looking specifically for your loan agreement (full breakdown of terms, fees and rate) and your prepayment penalty rider. Also, take out anything where a prepayment penalty is mentioned. Sometimes the wording can be complex and confusing, and you’ll want to have all relevant documents in front of you. Determine the type of prepayment penalty you have. Usually, the penalties are one of two varieties: a fixed penalty that expires after a period of time has elapsed or a structured penalty that is based on the time you’ve kept your mortgage. If your penalty is a fixed value, and you’re within the expiration period, the dollar amount listed is what you’
