Prepayment?

Comments(4)

• 
  jeff1200220th January, 2005

  When a lender issues a loan, they need the loan to be in effect for a period of time (maybe 2 or 3 years) in order to acheive a minimum acceptable rate of return. They often place a prepayment penalty in place that basically says that if you refinance in say 6 months you agree to pay X amount of dollars over the outstanding loan balance. This helps then stay profitable etc. and is quite common.

• 
  Fishbowl121st January, 2005

  What if you make a larger payment every month than the note calls for? Does this apply towards principal?

• 
  vasiliy23rd January, 2005

  Yes, extra payments will be counted towards the principle. Most A paper loans will not have a prepayment penalty. The ones that due, typically is a prepayment penalty of 6 months worth of interest, usually in effect for 2-3 years. If you make extra payments on your home, you should not trigger the prepayment penalty, unless you pay off a significant amount of money. For example, a prepayment penalty would be in effect if you pay off more then 10 percent of the principle balance within the first 2 years. As long as you don't pay more then 10 percent, they it will not be triggered. This is just an example, but is pretty typical.
  
  Hope this helps.
  Vasiliy

• 
  vasiliy23rd January, 2005

  Mutli unit property is considered residential as long as its a 1-4 unit property. Everything higher then that is considered commercial.
  
  Vasiliy
  
  
  Quote:
  On 2005-01-20 15:19, Fishbowl1 wrote:
  Is prepayment usually allowed on residential loans? Does it have to be in whole or can it be in part?
  
  Also, when buying a muti-unit for residential purposes is the loan classified as "residential?"
  
  Thanks.