How to calculate prepayment fee for house mortgage, is it true we pay lessif we pay extra payment in
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I found this on the website for the mortgage... (Prepayment Fee: For fixed-rate loans, the following prepayment fees apply to any payment made in excess of the fixed payment schedule: 3% of prepaid amount for year 1 & 2, 2% for year 3 & 4, and 1% for year 5 and beyond). so can anyone show an example how it works ?
In addition, if I have certain amount of money, should I go ahead and pay for half of my mortgage ? would it reduce my monthly interest if I do so ?
How to calculate prepayment fee for house mortgage, is it true we pay lessif we pay extra payment in advance?It's simple. If your payment is $1,000 and you decide to pay $1,500 with the extra $500 going to principal then it's just 3% of $500 or $15 (depending on which year you're in). If you pay half your mortgage that's probably going to be a huge fee.
Paying half of your mortgage off now would absolutely reduce your monthly interest payment and pay your loan off quicker. What you have to look at to see if it's a good decision for you.
1. How much are they going to charge you for paying that much now?
2. How much is that going to save you in interest in the next few years, versus waiting until the pre-payment penalty expires?
3. In the long run..how much interest will that payment save you versus how much would you receive for investing that money somewhere else? (figure this out with paying the pre payment penalty and also with waiting for it to expire to pay this amount off)
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