Wow, this was interesting!

iVillage Member
Registered: 12-05-2004
Wow, this was interesting!
2
Thu, 01-27-2005 - 1:12pm

I called my bank today to inquire about my 2nd mortgage. This is our "target" debt this year. I wanted to know if there was a pre-payment fine. In other words, would I have to pay a big fee to pay off the loan faster than the 20 years that it's actually for.

I was surprised by what she told me. Maybe others have heard of this before, but I hadn't. She said that if I paid off the loan in one large lump sum, I would be penalized $100. BUT...if I paid the principle down a little each month, I would not be penalized at all. Isn't that interesting? So if I had all the money in-hand today, they would make me pay an extra $100....but if I took that money and split it over mulitiple month's payments, even if it's just a few months, there's no extra charge.

Fascinating! LOL! :-D

iVillage Member
Registered: 04-14-2003
Thu, 01-27-2005 - 2:43pm

I guess it would depend on how much you pay in interest every month. Would it be worth it to pay off the outstanding principle and interest and then tack on a $100 fee, or pay the extra few months interest, which could add up to more than $100?

Windy

iVillage Member
Registered: 09-21-2004
Thu, 01-27-2005 - 10:43pm
I have always thought this was stupid when companies or banks do that, penalize for paying off early. Yes essentially, they are losing money if you pay it off early but you are also losing money by paying on it longer than you actually have to. Since you are the one who borrowed the money, it should be up to you how early you pay it off. But then again, banks are charging for the dumbest crap these days. It's senseless.