We bought a property and want to sell it within the 1st year. Our broker told us we will have to pay a fee on the balance. He tells us it's 2% (seems way too low), but most other people I've talked to tell me it's 20%, which makes much more sense... I think he's lying, where could I get this statement in writing?
2006-08-17 00:52:43 · 7 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
Two types of PrePayment Penaltys
Hard and Soft
Hard mean that if you refinance or Sell the property you will be fined by the bank that originated the loan for you.
Soft mean that if you refianance the home you will be fined by the bank that orginated the loan for you. But if you sell the home than you will not be fined.
So when talking to your lender ask them whether its a Soft or Hard Prepay. Some banks have Flat fee and some have % to your loan amount. Different regulations for different lenders. You can even refinance the day after you purchased the home. So here more facutal information that you were seeking and good luck on your choice.
2006-08-17 07:02:55 · answer #1 · answered by Openthathouse.com 4 · 0⤊ 0⤋
There is no "penalty" for selling a house withing one year, but it's unlikely that any gain in the value of the property will exceed the costs of selling the property. The tax treatment of any gain there may actually be is also different (ask your tax person).
What there may be, in fact likely is in your case, is a prepayment penalty for paying the mortgage off early, which you have to do when you sell, as every mortgage I've ever heard of has a "due on sale" clause. The typical penalty for this is six months interest on the loan. A few have so-called "soft" prepays where no penalty is due if you actually sell the property, but most are "hard" prepays where it doesn't matter the reason, only that you pay the loan off before the prepayment penalty expires.
(There are also loans universally available without prepayment penalties).
2006-08-17 03:44:27 · answer #2 · answered by Searchlight Crusade 5 · 0⤊ 0⤋
You have two penalties to think about. One is taxes -- if you don't occupy a property as your primary residence for at least two years, you'll have to pay capital gains tax. That amount will vary depending on the tax bracket you're in.
The second is the pre-payment penalty on the loan. Check the loan documents to see if there is one and how much it is. The amount here will vary from state to state, since the maximum allowable amount is set by the individual states. Here in Idaho, for example, it's 6 months interest on the principle owed.
You can get the exact amount of the pre-payment penalty by requesting a payoff quote from your lender. Some lenders charge a sevice fee for doing this.
2006-08-17 01:02:44 · answer #3 · answered by Gitchy gitchy ya ya da da 3 · 0⤊ 0⤋
i would get the man to sign a paper stating that the penalty for selling early will be 2% of the selling price.most people sell when their family increases.there is a bigger penalty by selling in a year unless you have paid at least 1/4 to 1/2 of your payment each month.when you sell you would be losing money instead of gettinf a substanial profit.also if you have done any remodeling you would actually lose if and only if these improvements were not over 10k.
2006-08-17 01:19:23 · answer #4 · answered by Anonymous · 0⤊ 0⤋
First of all certain states have prohibitions for prepayment penalties, second of all your loan instruments should address what happens regarding costs you would incur in an early sale. Go to your state's Financial Institution Division's Web site and you should be able to find the laws relating to your situation. As to the IRS and taxes; that one you really need to look at closely. For a detailed explanation of what your taxes could be in the event of a profit you should go to www.realestateformnm.com and order their free real estate pamphlet on flipping real estate that will give you a bird's eye view of what you should take into consideration when flipping real estate.
2006-08-17 01:48:47 · answer #5 · answered by newmexicorealestateforms 6 · 0⤊ 0⤋
You need to read your loan documents that you signed when you took out your mortgage. Very often the prepayment penalty on the loan is 6 months interest if you pay the loan off within 2 years.
2006-08-17 00:58:47 · answer #6 · answered by SunFun 5 · 0⤊ 0⤋
You could pay pre-payment penalties, often up to 6 months of interest on the loan, depending on what you agreed to in your loan documents.
In addition, you will pay short term capital gains taxes on any profit from the sale.
2006-08-17 02:08:18 · answer #7 · answered by HMMMMMM 3 · 0⤊ 0⤋