Watch out for that Pre-Pay Penalty!
If you are thinking about selling your home, make sure to check your existing home loan(s) for any pre-payment penalty. They can be quite stiff!
Remember back when you were setting up your mortgage, and perhaps you got a better deal by including a pre-payment clause? The lender gave you a better deal because they thought you might stick around for awhile sending them regular checks. They like checks! Well, if you go away before 3 years or 5 years (depending on your own loan), you could get stung with a hefty penalty costing you thousands of dollars.
Even if you are selling your home close to the date, it could throw a wrench in the process. Say you want to schedule close of escrow for right after the pre-payment cut-off date, but if you submit a loan payoff demand even 24-hours before the the penalty phase ends, you could still owe the fee. So, watch the dates in addition to watching the money.
For more on pre-payment penalties, including a great summary of why they exist, check out Mike Mueller's blog. Or if you have further questions about the little details you have to watch out for when selling your home, let me know. I'm always happy to help. I can be reached at 510-547-5970 x57 or MSmartt@jps.net.
