Is Your Lender on the Implode List?
If you are thinking about a second home mortgage, or even selling your home in some cases, it’s time to carefully look over your situation. Why? Because if you have a prepayment penalty, your mortgage lender may not be very flexible about it.
Consider: since the downturn in the credit market began (and there were signs of the impending doom in 2006), more than 100 U.S. mortgage lenders have imploded. They are in trouble, and they have stopped lending money.
This means that these mortgage lenders (many of them in the subprime market) are in no mood to be forgiving or understanding of a prepayment penalty. If you get a second home mortgage, or sell your house, that means that you won’t be paying as much to the lender, since your original mortgage will be paid off. The lender will miss out on interest charges. Which is where the prepayment penalty comes in. This ensures that at least some of the interest charges are recouped. So lenders in troubled won’t be as willing to work with you about your prepayment penalty.
One way to keep track of which mortgage lenders are in trouble is to check out the Implode List. The Implode List is a tongue in cheek Web site that lists mortgage lenders that are facing trouble. You can peruse the list and discover whether your current lender has imploded, and prepare for the worst in terms of your second home mortgage or selling your home.
This leads to an important lesson about getting a home mortgage. Carefully find out if your mortgage comes with a prepayment penalty. Try to find a mortgage that won’t penalize you for paying it off early. In many cases, you will have to get a conventional loan in order to accomplish this. A subprime loan (which is still available, though harder to find and to get) will more than likely come with a prepayment penalty, as will other unconventional loans.
Tags: prepayment penalty, home mortgage blog, home mortgage loan, Implode List,
second home mortgage, mortgage lenders, selling your home
