How you can avoid costly Home mortgage penalties and fees
Two things to check for when evaluating your loan offer are hidden
closing costs and prepayment penalties. These are often overlooked because people just
don’t think about them.
In fact, after the rate and down payment, many people gloss over most of the other
details. Doing this can cost you money and restrict your future options. We’ll
show you how to leave your options open and spot unnecessary costs.
Don’t be surprised by your closing costs.
Closing costs are part of every loan. Some of them you simply have to pay and are
standard in loan offers. Others can be added to increase your lender's profits. Your
lender is required to provide you with a Good Faith Estimate (GFE) which lists all of the
closing costs associated with your loan. When reviewing your GFE, look for origination
fees and points.
- Origination fees
- These are points added to your closing costs that go directly to your
lender’s profits. You can usually negotiate to have these removed.
- These should only be paid if you asked for them and plan to stay in your home for
a while. If you plan to move or refinance soon, this is money lost so get them removed.
Closing costs can add a significant amount to your purchase price. It’s a good
idea to get an estimate of what this number will look like. Plug in your loan numbers now
to get an accurate account of your closing costs.
See how much you can save by paying off your mortgage quicker.
Prepayment penalties can stop you from paying off your loan on your terms. If you get
a promotion that puts more money at your disposal each month, it can be a good idea to
pay down your mortgage. This builds equity quicker and lowers your total payment amount.
Some lenders add prepayment penalties into your loan offer. Make sure you ask your lender
about these and have them removed if possible. Extra mortgage payments can significantly
reduce the amount of interest paid on your loan. See how much you can save by adding a few
dollars to your monthly mortgage payments.