Question by emuleiii: why do i need to pay extra amount when i pay off my mortgage ?
why do i need to pay extra amount when i pay off my mortgage ? I wanna pay off a refinance mortgage. i see I have principle amount 142k on line, but when i request a payoff statement, it comes out to be 146k . how come ? i asked what is that for , and i was told it is for some kind of fees … which i have no idea about. any financial expert know is it normal ? ?
Best answer:
Answer by BabyLuv
Ask your mortgage company to break them down exatcly and they will do it for you. Sometimes you get a pre-payment penalty.
Add your own answer in the comments!
Yes it is a penalty fee for paying off your mortgage early. If you look at your mortgage agreement it should state about this penalty clause in there.
It’s probably a pre-payment penalty since they wouldn’t be making all their Interest by you paying it off so early.
This was probably in the fine print when you signed the mortgage contract. It is to help them get some of the money that you would have paid in interest if you had kept paying monthly until it was all paid off. It isn’t nice to have to do, but if it was in the contract that you signed, then it is legal.
The previous poster is right. It’s a prepayment penalty. To have gotten your mortgage in the first place, you would have had to sign a contract with a prepayment clause and this would have stated whatever the penalty was, either in a percentage or dollar amount. They charge this because you’re paying the money back sooner and therefore not paying all of the interest they were expecting. Remember, interest is what you pay to use someone else’s money for a specified period of time!
The only reason I can think of is some loans have early payoff clauses. They lose interest when you payoff early so, charge you a penalty to recoup some of that loss. It stinks but, is completely legal. Llive and learn. Be sure any other loans you get from now on don’t carry that penalty.
The company mortgaged it for you believing over the term they’d be paid a certain amount in interest. By paying it off early they loose some of their profit.
Its called a redemption settlement fee !!!! it sucks i know… basically they are charging you a percentage of interest that they would of made out of you long term…. if you ever take out another mortgage make sure you get one that doesn’t charge you this fee for settling it up early…that’s what I’ve got xx
I would say some of that the extra money would be for the accrued interest that would be due.
The rest of it could be for a prepayment penalty.
You should check into that.
If the current interest rates are higher than what you have they may well forgive that penalty.
But if your interest rate is higher than the current rates they may well hold you to the penalty.
When they grant mortgages they include the penalty to protect them self because of the difference in rates.
You are charged interest daily until it’s paid. Plus you pay all fees to the mortgage co has to pay to satisfy the loan. If your loan is fairly new, you could be paying about 30.00 per day in interest. You can call the mortgage co and ask what the per-diem is on your loan.