Beware penalties when you refinance your home!

If you are looking to refinance your mortgage, the calculation of prepayment penalty is crucial. Why? Because the fee may be high, so high that it could cancel the savings.

Even if they often deny it, banks blurred the calculation of the penalty they impose in the early repayment of the loan, a very important when you are thinking refinancing. In order to avoid problems, look at your bank’s agreement.

For example, penalty for early mortgage refinancing may be the greater of those amounts: the fee for three months of interest or the difference between the interest rates for your mortgage.

To help you, here is an important point to watch when your bank tells you the amount of the penalty for refinancing: Is the bank has subtracted the mortgage balance reimbursement without penalty to that authorizes your agreement?

Suppose you have a mortgage of $500 000. Your balance is $ 350 000 and you wish to pay it refinancing your home. Your agreement allows you to pay without penalty up to 20% of the original amount.

So, your penalty will be calculated on $250 000 (350 000 – 20% of 500 000 [100 000]) and not on your balance of $350 000.

That’s all for this article. If you have any comments of experience to share about home mortgage, refinancing or related subjects, please write it right away! You will help a lot of people to get good information and avoid mistakes!