 Wysłany: Nie 13:25, 13 Mar 2011 Temat postu: choo 9684 |
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| All about Mortgage Penalities (hypotheque)
Sometimes charges are even worse In general, for a fixed loan, the penalty is usually the higher of either three months interest or the differential between the loan rate and the current rate for the remainder of the term of the loan. BUT... it is not always that simple. There are lenders, and this includes the largest mortgage lenders, who try to calculate the rate difference in the way that is most beneficial to them, sort of creative financing. Rather than using the discounted rate that they used on the original loan, they will use the posted rate, which is usually the highest mortgage rate. This is why it is very important to obtain an estimate on prepayment penalties from your lender. (NOTE: We want to inform you of this so that you know to be careful and be sure to choose a good lender. Working with an experienced broker can help you place your mortgage application with a lender who uses the best penalty result for you. There are different ways of figuring the penalty, depending upon the product: Different loan products have, in general, different penalties: ��? Open Mortgage Loan: this is the only kind of loan that does not include a penalty for pre- payment. The various types of ��line of credit" mortgages are frequently open mortgages. ��? Fixed closed mortgage loan: For the most part, the penalty is figured as the higher of either three months interest or the difference between the initial rate and the current rate, for the rest of the term of the loan. ��? Fixed closed long term mortgage: Home loans that have maturities of over 15 years o For the beginning years of the loan, is the higher of three months interest paymentsor the difference between the original rate and the current loan rate, for the balance of the life of the loan. o? After five years, it is only three months interest. �� Variable closed mortgage loan: In general, three months interest but some lenders only charge two months interest and there are others who may charge as high as six months interest for a penalty. �� Mortgage loan ��5 in 1": Some lenders prefer this type of mortgage; the penalty on a five in one home loan is usually 6 months interest. Reimbursement of cash rebate There are some mortgage loans that have a cash rebate. In these cases, you won't surprised that the rate is higher and that you must reimburse the cash rebate equal to the number of months from the time you break the contract to the completion of the original mortgage term. Example: You have received a cash rebate of 4% of your mortgage of $200, 000, that is, $8, 000. You pay off the mortgage thirty months later (on a mortgage term of 5 years, or 60 months). You must repay 31/60ths of the rebate (there are 31 months between the 30th payment and the 60th payment on a total term of 60 months). The calculation is $8, 000 times 31, divided by 60, or $4, 133. 33, to come to the amount of the reimbursement of the cash rebate. Yes, the reimbursement of the cash back is tacked onto the penalty, which can very drastically increase the total penalty. You may ask why there is an early payment penalty in the first place. In the world of mortgages, very few banks hold onto the loans they make. They continue to administer the loan, but they market the loans in the secondary mortgage market to investors, who buy these mortgages in lots of $100 to $500 million. These investors have the intention of earning the interest on the loan for the remainder of the term. If a mortgage is paid down before the term is over, no matter how little time is left on the loan, the lending bank will have to administer the contract changes as well as pay off the lenders for the amount of future revenue they are not going to earn now that the loan is paid off. These costs are not absorbed by the bank, but are passed onto the borrower in the form of charges and penalties. Another reason is that lenders want to induce their clients to stay with them. This is a method for them not to lose clients. Gregory is an Accredited Mortgage Professional (AMP). To get more information on mortgage rates - taux hypothecaire, please visit: Mortgages - hypoth��queTopics related articles： 0131 asic 4924 article5467 |
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