Does anyone know what the story is about refinancing and then facing hefty pre-payment penalties.
I know someone who refinanced their house to get over a hump.
Now they want to put the money back into their house again and they now discover that they face a big pre-payment penalty.
Is this common with all banks and loan products or is it just this particuar bank – you know; that one. [biggrin]
thanks eddie
Maybe they are on a fixed rate? Many lenders impose penalties for paying more than a certain amount per year off fixed loans – usually around $10,000.
Terryw
Discover Home Loans
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That’s where a good broker comes in. He/she will advise you beforehand of the pros and cons of certain options. And the more you explain him/her of your future plans, the better he/she can tailor the product.
It also helps to have a checklist of questions to ask before choosing/signing a document.[biggrin]Thanks for that people. I was just womdering wot the story was in terms of how the banking industry operates when it comes to pre-payment penalties.
The must be a lot of people who get a bit of windfall an want to pay their house and particualrly after they had to refiance earlier to pay school fees and so 4th.
Isnt it half naked greed on the part of the banks the way they go about giving you credit but give you a strong disincentive to pay it back in large amounts. Really starting to look like riff off merchansts these days. only one up from loan sharks.
eddie
Depends how you look at it. Most variable loans have no penalties, but fixed rates do.
If the bank lends you $100,000 at 7%, fixed for 5 years, they are assuming you will be paying them $7,000 for 5 years.
If rates drop to 5% and you suddenly want to pay off your loan to $50,000, then the bank will be losing out. They can only relend that $50,000 at 5%.
Terryw
Discover Home Loans
[email protected]
Send an email to get my newsletter.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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