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Old 07-19-17, 09:13 PM   #91
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Originally Posted by LexsCTJill
Best explanation below:

Lenders charge prepayment penalties because it enables them to place the loan in a security and sell it; because another institution might buy that security, it will need assurance that the loan will be outstanding for a set period of time, which means the buyer will receive a certain yield from that security.
This is not true. A loan does not have to have a prepayment penalty to be sold on the secondary market.

FACT, 99% of loans have no prepayment penalties. It's only niche products, the sort of products that aren't sold as securities, that do nowadays.

I have sat at the settlement table of over 500 real estate settlements over the last 15 years, I have seen maybe 1 or 2 loans with a prepayment penalty.
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Old 07-19-17, 09:19 PM   #92
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If I had 50000 cash, I'd still borrow 50000 at 0% apr and pay it off in 10 years, if they had those terms.
I can then invest my own 50000 and get a bigger return.

i'm not rich, but I know rich people usually don't spend their own money. They spend other people's money
correct, and even those that are not wealthy do this.. it's being money smart.

the problem isn't having $50K and borrowing $50K at 0%, the problem is not having the $50K and borrowing $50K at any rate above 0%.
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Old 07-19-17, 09:23 PM   #93
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Originally Posted by SW15LS View Post
This is not true. A loan does not have to have a prepayment penalty to be sold on the secondary market.

FACT, 99% of loans have no prepayment penalties. It's only niche products, the sort of products that aren't sold as securities, that do nowadays.

I have sat at the settlement table of over 500 real estate settlements over the last 15 years, I have seen maybe 1 or 2 loans with a prepayment penalty.
I'll agree with this, I have a current "product" that had a pre-pay penalty.. the terms of the loan were zero closing costs, the bank paid everything except the partial month interest and the property tax holding, all the doc fees, appraisal, etc. was picked up by the bank, the term was no refi or payoff for 36 months after escrow closed or I have to repay all those costs that they covered. I'm well past that mark now, but it was the banks way of guarantying they got their 36 months of interest.

most HELOC loans also have a similar clause.
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Old 07-19-17, 09:25 PM   #94
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Originally Posted by pman6 View Post
If I had 50000 cash, I'd still borrow 50000 at 0% apr and pay it off in 10 years, if they had those terms.
I can then invest my own 50000 and get a bigger return.

i'm not rich, but I know rich people usually don't spend their own money. They spend other people's money
I agree. If you are going to get 0%, totally go for the finance. But I would say that having a rock solid job needs to be there too.

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Originally Posted by mikedozz View Post
totally agree with you....college tuition is ridiculous, most parents cannot afford, the kids are graduating with 70k of debt right out the gate plus paying rent and expenses, it's tough.
Here is a good article on the cost of school.

https://www.attn.com/stories/197/how...n-1978-vs-2014
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Old 07-19-17, 09:50 PM   #95
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Originally Posted by mjeds
I'll agree with this, I have a current "product" that had a pre-pay penalty.. the terms of the loan were zero closing costs, the bank paid everything except the partial month interest and the property tax holding, all the doc fees, appraisal, etc. was picked up by the bank, the term was no refi or payoff for 36 months after escrow closed or I have to repay all those costs that they covered. I'm well past that mark now, but it was the banks way of guarantying they got their 36 months of interest.

most HELOC loans also have a similar clause.
Exactly, and that's the sort of product where you would expect that there would be a prepayment penalty since that money was fronted by the lender.
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Old 07-20-17, 05:04 AM   #96
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Originally Posted by mjeds View Post
I'll agree with this, I have a current "product" that had a pre-pay penalty.. the terms of the loan were zero closing costs, the bank paid everything except the partial month interest and the property tax holding, all the doc fees, appraisal, etc. was picked up by the bank, the term was no refi or payoff for 36 months after escrow closed or I have to repay all those costs that they covered. I'm well past that mark now, but it was the banks way of guarantying they got their 36 months of interest.

most HELOC loans also have a similar clause.
Now that you mention it, I think mine had one for 12 mos.? Something like if closed within 12 mos., the penalty was a % of the highest balance. haha I didn't have a balance and there was no required draw. When I got it in 2006, prime minus 1% sounded pretty good (not so good today and esp. over the last 6 mos), I told myself this is my protection against job loss, etc. Again true no fee except county record of $76.xx to close it. At the time, everyone was writing them, even VW Credit, nuts. I'm glad someone told me about the 10 yr first lien position home equity product, never heard of such a thing at the time, it was a way to get a lower rate with truly no fees (except the $76 at the end), no title, no escrow, no nothing. The fascinating part was the heloc subordinating the first time I did it. And I did cheat, we had 8.5 years left, and I did it again and it went to 10, and I let it slide....in theory, one should never increase the time left of the payoff, but I did it because the interest dropped .005
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Old 07-20-17, 05:12 AM   #97
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Exactly, and that's the sort of product where you would expect that there would be a prepayment penalty since that money was fronted by the lender.
Just as I've only bought 3 new cars in my life, I've only bought one house. But I was told by a banker, no bank will ever pay your title insurance, not ever, which is why if you ask me, I wouldn't even consider refinancing a mortgage unless it were 2% less. But the way things are today (this was 2008), a banker might try to sell a refi as a no cash out of pocket and roll the fees into the principal. If you find a bank that will pay your title insurance, let me know, my wife and I would consider having our mortgage through them.

My aunt claims she refi'd with Jamie D. and there were absolutely no fees whatsoever, this is a 15 yr. mortgage, not a heloc. I told my wife I would have to see her paperwork to believe her, but I could be wrong. But just using common sense, let's say her title insurance were $6,700, the bank is going to eat that? Now with home equity products all bets are off, there are true no fee products, as title insurance isn't required. That's why some folks like me have no mortgage, but have a home equity product in the first position.
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Old 07-20-17, 05:19 AM   #98
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What value house are we talking about here? $6,700 is a huge cost for title insurance.
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Old 07-20-17, 06:13 AM   #99
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I arbitrarily punched 800k into the first online calculator I found, for PA, and that's what it came back with....however, she's in NJ. Then, I found some website Stewart who has all states, so I redid the 800k with PA, it said $4,100, but with NJ, only $2,900....
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Old 07-20-17, 06:14 AM   #100
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Those costs are more realistic. Also bear in mind you have simultaneous rate discounts, and reissue rate discounts depending on how long ago you last bought title insurance.
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