When wanting to refinance a home with an arm loan before the 3 yrs are up how much do the penalties run?

Answer 1

Usually about 6 moths of payments. So if your mortgage is $1,000 then the penalty is $6,000.

Answer 2

1. First and foremost, it is impossible to answer this question without knowing the STATE in which you live. State law usually determines the maximum amount of a penalty and the length of the prepay penalty period - in fact, some states do not allow prepay penalties at all.

For example, the amount of a CALIFORNIA prepay penalty is almost always 80% of six months interest.

2. Be aware that having an ARM does not automatically mean you have a prepay penalty. However, if your loan is through a sub-prime lender, then you almost surely do.

3. Almost all lenders sell their loans to investors on the secondary mortgage market. Meaning: your current lender does not "own" your loan anymore. At most, they collect the payments (service the loan) for their investors. Thus, getting out of a prepay penalty by refinancing with the same lender is seldom possible.

BE CAREFUL: Lenders sometimes are unscrupulous and say something like "don't worry about the prepay penalty, we will take care of it if you do a new loan with us". Translation: The prepay penalty is part of the new loan's closing costs, it does NOT disappear.

If you wish, I can provide further assistance through email at [e-mail]

Answer 3

I had an ARM and didn't have to pay a penalty when I refinanced. Call a mortgage broker and see what he/she can do for you. Most penalties and fees are negotiable. I've always found it more beneficial to use a mortgage broker than to go directly to individual banks or lending companies. You may want to try that.
Or maybe first call your current lender and see what they say. Sometimes if you're willing to refinance with them again, they'll give you a break. It might still be wise to shop around though, sometimes they'll act like it's the best deal you can get when really you would do better switching to someone else.

Answer 4

If you are certain that you have a prepayment penalty then its typically 6 months of interest but I have also seen a 5% prepayment penalty. It can sometimes be negotiated that if you refinance with your current lender they will wave it. I highly recommend using a mortgage broker still as they control millions of dollars a month that could persuade your current lender as well. I hope this answers your question and helps you but if you need any further assistance please don't hesitate to email me.

Answer 5

All lenders are required to list the terms of the prepayment penalty in a "rider" that is attached to the note that you sign at closing. They do vary, for instance 3 year prepayment penalty year one you pay 3 years' interest, year 2, 2 years' interest and year 3 one year's interest. It depends on your current rate and the actual lender's terms.


A few sites that offer free calculators are here:

http://www.realwebfunds.com/expert/prepaymentcalculator.asp
http://www.forsalebyownercenter.com/tools/mortgageprepaymentcalculator.aspx
http://www.loopnet.com/xNet/MainSite/LoopLender/Calculators.aspx?Calculator=yield

Answer 6

Usually you can find out yourself by looking at the "Note" document in your loan papers. Sometimes, it is on a "Prepayment Rider".

Typically, the prepayment penalty is 1-3% of the loan amount.

Answer 7

Most of the loans I have seen don't have any penalties for pre-payment. You should read your loan agreement and see what it says. Look in the folder of papers from your closing. There you will find a loan agreement which will have a clause in it about pre-payment penalty if there is one.

Answer 8

Like the person said below me probablly about 6 months worth of interest in your payments. but it depends on which type of loan program you are in. Every single loan has different guidelines it could be less it could be more.