Does any know of a way to get out of paying a prepay penalty on house loan?

Jo
I have an interest loan for $158, 000 and second for 39, 500 to which i need to pay 5% on both if I pay before five years o refinance.

Allyn
The easiest way to avoid the prepay penalty is to sell the home.However, if you're upside down in the property, i.e., the home is worth less than what you owe, then, some states have antideficiency statutes which prevent a lender from collecting any additional money from a borrower who defaults on a home loan. If you are in one of those jurisdictions, and your home's equity is maxed out, so you can't get any more out of a sale or refi, then you could just call the lender and ask to waive the prepayment penalty, and that if the lender refuses, you'll just walk away from the property and they will be stuck with the loss.Of course this will also ruin your credit rating for the next seven years, so it's far better to just sell the property and move on, if you can afford to do so.

Johnetta
Selling a home does not always excuse you from a pre-payment penalty. There are "Hard" and "Soft" penalties.If it is a Hard penalty on your loan, you will be charged the 5% regardless if you refi or sell.If it is Soft, you can sell and have no penalty. Just a penalty if you refi.Call whomever you have the mortgage with now and ask them if they will waive the penaly if you refinance with them directly. Sometimes they will, sometimes they won't. If they do, just make sure the new loan does NOT have a new penalty. It depends on the company.You can find out the terms of your prepayment penalty by looking at your "NOTE". It will be with all the papers you signed at the closing table.

Letty
The reason you took a loan with a pre-payment penalty was because you got a lower interest rate by promising to keep the same terms for the 5 years. If you pay the loan off before the term, you pay the penalty. Period. There is no exception for selling the house or winning Powerball or anything else. However, the penalty usually declines the longer you stay in. If your life has changed that much, you get to decide which has higher priority -- the loan contract or your new life. Cheers! Leigh http://www.LeighMaynard.comReal estate typhoon since 1986