How could you get a lender to waive a pre-payment penalty?

Question

or reduce?

Answer 1

Make it in their best interest.

If you are about to go into foreclosure then you could show them if they waive the prepayment penalty you would be able to sell it and you could avoid foreclosure.

If you are about to refinance, offer to refinance thru them if they will waive the prepayment penalty.

If you can't make it in their best interest then they probably won't waive it.

Answer 2

In general, once a lender makes a loan, they sell the note to investors (pooled with many other loans) on the market so the lender can turn around and lend more money. So, the prepay penalty is there to protect the investor. The investor bought mortgages expecting to be paid XYZ interest over 2, 3 years (what ever the prepayment period is on the loan) If you pay that loan off sooner, the investor lost income that was expected from that loan - that is why most lenders can not re-negotiate the prepayment penalty is because they sold the note.

In a few cases, with smaller banks, if you refinance WITH that bank again, because the bank HELD your note (in house) then you have a MUCH greater chance of getting the prepayment penalty waived.

Hope this helps, and good luck

Answer 3

The only way to get out of a contractual obligation is to induce the other party to the contract to let you out. But lenders rarely have a reason to waive a prepayment penalty. Considering that you are terminating a relationship with them to start anew with another lender, why would they? The lender will surely say "no" if you ask.

You might discuss this with your new potential lender, sometimes they will eat some of the pre-pay penalty to get you as a new customer.

If your original loan was horrible, sometimes consumer groups can get a lender to backoff on the penalty for fear of bad publicity, you might check with your local consumer groups.

If you are in good standing, you might be able to work with the current lendor to refinance and get a better loan without pre-pay penalty and potentially better rates.

Answer 4

Its tough, but read your loan note addendum to see what it says. A lot of lenders will not waive it & the reason is that you agreed to give the bank a certain rate of return for X amount of time & now you are breaking your side of the commitment. So you get penalized for it.
A lot of lenders have a step-down prepay that goes down each year so maybe you are just a few months shy of having a decrease to the prepay. Check your note!!

Answer 5

Pretty much that bank still has to hold the mortgage and you refinance with that same bank either through a broker or through that bank directly. Lenders typically won't waive it for any other reason.

Answer 6

Talk with a mortgage broker about a refinance. See if they would be willing to get you into a high-interest mortgage with no prepayment penalty for a couple of months. This kind of loan gives them a huge commission. They would then give you part of that commission to pay off your prepayment penalty.

Then, a couple of months later, refinance to a low-interest loan that also doesn't have a prepayment panalty. This gives the loan broker a small commission. But, they get paid for working the loan twice and you get your prepayment penalty paid off. You also get to write off the prepayment panalty on your taxes next year.

I did this with a mortgage broker many years ago. Worked like a charm. And, it was actually his idea.

Answer 7

Especially in todays market, you don't it was put in there to protect their profit in the case that you find out you where being ripped off to begin with

Answer 8

You can try to talk to an attorney, look for any real or technical reason for a lawsuit.

Answer 9

do not think they will do it sorry

Answer 10

you'll be lucky!