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Paying a mortgage prepayment penalty is never desirable when you are a homeowner. However, in order to get a desirable loan, you may have to agree to a prepayment penalty. That does not necessarily mean that you cannot lower the penalty at all. Here are a few steps to take in order to lower your mortgage prepayment penalty. The first thing that you are going to need to do is review your mortgage papers.
1. Review the Mortgage Papers
If you are in the process of closing on a loan, you should have copies of the mortgage documents. Within these documents, you are going to be able to read the fine print and find out the details of your prepayment penalty. The document that you are looking for might be called a prepayment disclosure and should be attached to your note and deed. Sometimes, it is a rider. Sometimes, the verbiage is added directly to the note and deeds. Review the document and make sure that you understand all of the details associated with it.
2. Talk to Your Loan Officer
Once you have looked at the mortgage papers, you are going to need to speak with your loan officer. During this conversation, you should ask them about the prepayment penalty. Make sure that you understand the terms that are in your mortgage loan contract. They will be able to translate the terms if you have any trouble understanding them. Ask them specific questions so that you can get to the bottom of the prepayment penalty and begin understanding exactly how it works.
3. Shop Around
If you have not signed your mortgage papers yet, you are still free to shop around. Even if you are not serious about working with any other lenders, it can be to your advantage to continue to shop around. This is going to give you some leverage when it comes to talking to your lender about the prepayment penalty. When you talk to other lenders, you want to get something in writing so that you can show your lender what others are charging for prepayment penalties.
The negotiation process might take some time, so you need to be patient. You can call your lender or negotiate in person. When you are talking about the prepayment penalty, let them know that you are not satisfied with the current terms. Inform them that you believe the prepayment penalty is a little bit high and that you would like them to change it. Do not avoid the topic.
You need to be firm and let them know that you want them to lower your prepayment penalty. Show them the quotes that you have gathered from other lenders to let them know that they are not the only lender in town. If you remain firm, there is a good chance that they will eventually lower the prepayment penalty for you.
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