Posted on: 17th Oct, 2013 12:19 am
Paying off the mortgage is good... If that is the case, then why do lenders charge pre-payment penalty? This has frustrated me!
Hi Guest,
The lender gives you the money in order to earn profits in the form of interest payments. If you pre-pay the loan, the lender will have to lose his profit, i.e. the interest payments. In order to recover a part of his profits, he charges the pre-payment penalty.
Thanks,
Jerry
The lender gives you the money in order to earn profits in the form of interest payments. If you pre-pay the loan, the lender will have to lose his profit, i.e. the interest payments. In order to recover a part of his profits, he charges the pre-payment penalty.
Thanks,
Jerry
Hi Guest!
Welcome to the forums!
To know all about pre-payment penalty, please check out the given page: http://www.mortgagefit.com/prepayment-penalty.html .
Feel free to ask if you've further queries.
Sussane
Welcome to the forums!
To know all about pre-payment penalty, please check out the given page: http://www.mortgagefit.com/prepayment-penalty.html .
Feel free to ask if you've further queries.
Sussane
It costs Lenders money to process and close a loan.
At lower rates, it takes longer to break even on the costs.
If a borrower pays off too early, the Lender may simply lose money.
To be able to charge a prepayment penalty guarantees they will not lose money.
The prepayment periods do not last forever, maybe 1 to 5 years. After that, no penalty anymore.
Many Lenders offer a higher rate with no penalty.
At lower rates, it takes longer to break even on the costs.
If a borrower pays off too early, the Lender may simply lose money.
To be able to charge a prepayment penalty guarantees they will not lose money.
The prepayment periods do not last forever, maybe 1 to 5 years. After that, no penalty anymore.
Many Lenders offer a higher rate with no penalty.
