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It depends upon whether or not you want to pay the prepayment penalty. You would need to consider the amount of interest that would be charged versus the amount of penalty incurred for paying the loan off early, before making a decision.

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โˆ™ 2008-10-31 07:57:15
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Q: If a loan has a prepayment penalty should you still pay it off?
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Related questions

How can you get out of a home loan prepayment penalty?

If this prepayment penalty is written into the contract, no way can you get out of it. Usually, though, the prepayment penalties last about 3 years. At the end of the 3 years, the prepayment penalty will be gone. Also, some companies will forgive the prepayment penalty, if you get your new mortgage through them if you are selling your current house and buying another house. Prepayment penalties are usually for paying off the loan, or paying big amounts back on the loan. Your contact will specify what the prepayment is for.

If a loan has a prepayment penalty attached to it could it still be viable to retire it and why?

Perhaps. The difference in the prepayment penalty and the amount of interest paid until the loan is satisfied is a major consideration. If the difference is small,early payoff might not be the best option.

What does a prepayment penalty that is Not Applicable mean?

If you have prepayment penalty clause in your agreement with lender, then if you pay off the entire loan amount with in the maturity period of your loan. You have to pay some amount of money as penalty. If prepayment penalty is not applicable means, even though if you pay off the the loan amount with in the maturity period. You need not pay any penalty.

What is the purpose of a prepayment penalty on a mortgage loan?

To discourage the borrower to payback a loan to quickly

Prepayment penalty on a fixed rate Was there a new law passed abour prepayment penalty?

That is going to be a State by State thing. But you will not find a Prepay penalty on an FHA or VA loan and typically you will not find them on Conforming loans (Fannie/Freddie stuff)

Can you take out a home equity loan if you have a prepayment penalty if you sell your home before two years after you purchase it?

Yes, as long as there is equity to use. The lender that will do the home equity loan will have figured the prepayment penalty into the 1st mortgage balance just in case you do sell your home before 2 yrs. are up. The lender will ask for specific paperwork including your mortgage (promissory note) so they will know about the prepayment penalty.

Should you retire a loan towards the end of its term or much before it?

Unless there is a tax benefit that you want/need, you should retire a loan as soon as possible. I am assuming that there is no prepayment penalty, which may impact your decision. It is costing you money (in interest) while you have the loan.

If a loan has a prepayment penalty attached to it would it still be viable to retire it?

You need to compare the cost of the repayment penalty and the benefits of having the loan (such as deductible interest) vs. the benefits of paying off theloan such as increase cash flow. Do that analysis and determine the best use of your money.

If a loan has a pre payment penalty attached would it still be viable to retire it?

It depends. One has to look at what the interest rate is, the amount of the term remaining, the amount of the prepayment penalty and the cost of the source of funds to pay it off. There is no one correct answer, sorry.

If a loan has a prepayment penalty attatched to it would it still be viable to retire it?

It would depend on whether the savings gained by "retiring" the loan outweighed the disadvantages posed by the pre-payment penalty. Most loans have pre-payment penalties which expire after a short period of time. On mortgage loans, the typical pre-payment penalty runs 1, 3, or 5 years.

Is there a way to lower mortgage payment?

One of the best ways to reduce mortgage payments is to do a mortgage refinance as long as the new mortgage interest rate is at least two to three percent lower than the current rate and there is sufficient equity in the house. It's also important to a make sure there is no prepayment penalty on the existing loan. A prepayment penalty is a fee charged by the lender if a mortgage loan is refinanced before the prepayment expires

Can you refinance an auto loan before a year?

yes - you can refinance an auto loan at any time. You will want to make sure you current bank does not charge a prepayment penalty though.

How soon can a mortgage be refinanced?

You can refinance your mortgage anytime you want to. There is no minimum time before you can refinance. That being said, you do need to be aware of any "prepayment penalties" or clauses. Some loans ( especially sub prime ) will have a prepayment penalty. If you refinance your existing loan before that pre payment period is over then you have to pay the prepayment penalty. These penalties can be as much as six months worth of interest. Check your original note to see if you have this penalty. If you do have a PPP then you need to weight the financial benefits of refinancing against the penalty. There are some cases where such a transaction still makes sense.

Are residential mortgage pre-payment penalties tax deductible?

I am not 100% certain of the answer, but in most cases we can deduct the interest, but not usually any fees associated with the mortgage. I am assuming you can't deduct it. Consult a tax professional. I have a suggestion for those who are thinking of paying off their mortgage when a prepayment penalty is in place. I used to be in the mortgage business. Suggestion: Prepayment penalties are usually around 5%. So, if you have a balance of $10,000 the prepayment penalty would be $500. There is a very simple answer for avoiding most of the cost of prepayment. In your next payment pay everything but a portion. Leave a balance of $100 or $500. In most cases the prepayment penalty is calculated on the balance. Make your your final payment of $100-$500. This way your penalty will only be a $5-$25 saving you a lot of money. Then the tax issue is really of no consequence.From IRS Publication 936: "Mortgage prepayment penalty.If you pay off your home mortgage early, you may have to pay a penalty. You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan." I paid a prepayment penalty and my year end interest paid for the loan included the penalty.Hope that helps. Navywings 17:21, 26 May 2008 (UTC)

What is purpose of a prepayment penalty in a loan agreement?

To discourage borrowers from paying their loans back too soon

If a loan has a prepayment penalty attached to it would it still be viable to retire?

If the pre-payment charge is considerably less than would be the amount of interest that would be paid through the duration of the loan, then it could be beneficial financially, but might also have a minor and temporary affect on the borrower's credit score.

Is a prepayment penalty on a home loan tax deductible?

No the penalty is not deductible on a home loan. Only the interest that is paid. The penalty is considered as a late payment not interest. good luck.The initial answer to this question is incorrect. Prepayment penalties are sometimes deductible if the payment is made out of pocket as opposed to being rolled over into the new loan. It is not ever considered to be a late payment. It is considred interest. Even if the amount is rolled over into a new loan, you may be able to pro rate the deduction over the term of the loan. The bottom line is that depending on your particular circumstances, the prepayment penalty might be deductible.PLEASE consult a tax consultant for the most up to date 2008 tax information. and also PLEASE remember that on the internet, never ever take the advice of one so-called expert. check. check and double check everything.Here is the info directly from the IRS. prepayment penalty. If you pay off your home mortgage early, you may have to pay a penalty. You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan.

What kinds of penalties apply when the home is sold or the loan is prepaid?

The easiest way to find out if you currently have a prepayment penalty is to dig out the paperwork you have from when you signed your final paperwork and look for your mortgage note. There usually will be wording in your note that outlines the prepayment penalty terms. Use a calculator like this one from the to see your savings.

How does one start the process of refinancing their loan on their home mortgage?

Before refinancing your home, one should consider if refinancing is the right option for them. Refinancing is intended mainly to lower one's interest rate. However, there are some things to be considered when doing this. Refinancing pays off the current loan and creates a new loan at a lower interest rate. Before doing this, the homeowner should know if their current mortgage has a prepayment penalty clause. This means that if they pay the current mortgage early they will have to pay a fine or penalty. This might make refinancing not worth it.

How soon can you refinance a home loan?

If you have equity in your home you can refinance at anytime.... Make sure your current home loan does not have a prepayment penalty. Next you would need to consult a mortgage lender:

How can you reduce your car loan?

If you mean how can you reduce your monthly payments, you can refinance at a better interest rate or refinance for a longer term. If you mean how to amortize your loan over a shorter period, pay an extra amount on top of your standard loan payment. Beware of early payment penalties if you pay off your loan early. Check with your lender to be sure there is no prepayment penalty.

What happens if I can't repay an easy payday loan on time?

When you signed your contract for a loan, by law there should have been an obvious penalty clause that explains the interest penalty if you are late repaying the loan. This is typically includes both a flat fee and an incresase in your interest rate. Your contract will have your specific details. If you cannot repay a payday loan on time, then you will be charged a penalty by the lender. What the amount of the penalty is, depends on the contract you signed with your lender.

What is a negative prepayment rate in mortgage backed securities?

When a loan is modified, usually fees and interest are added to its balance, effectively increasing it That can produce negative prepayment rate

What are loan prepayment tenure for home loans offered by banks in UAE?

All loans in UAE are known to follow the principles of Islamic Finance. Generally, home loan is given for a tenure of 1o or 15 years, Still, please check with your bank to know more.

How soon after you purchase your home can you take out an equity loan?

First you would have to determine if you have a prepayment penalty on your current home. In case you dont know, you can find that out if you call your mortgage holder. If there is a prepayment penaly it would be best to wait the period out in order to avoid the hefty fee. If you do not have a PPP, or would like to pursue despite the fee, you can do so at any time. If you need help with your transcation feel free to contact me @ 214)607-1445.