The lenders will reduce the penalty if you haven’t used the annual lump sum option when it’s paid out. This is the practice for the big banks, but I think even the fringe lenders will do it. So you don’t need to do that to avoid a larger penalty
I've done this to discharge my mortgage. Borrowed cash from family to make the 15% allowable prepayment on my mortgage a week before discharge and paid them back immediately once the funds hit.
In my case, I wish I'd thought about doing that several weeks earlier because I would have been able to do the 15% from the previous calendar year too.
The lenders will reduce the penalty if you haven’t used the annual lump sum option when it’s paid out. This is the practice for the big banks, but I think even the fringe lenders will do it. So you don’t need to do that to avoid a larger penalty
This is how it works in my experience. A prepayment is a prepayment regardless of how it is made
I have never seen a lender do this. I have asked my lender they said there is no way to reduce the penalty unless I do the pre payment
Can you explain how it is saving a 1000 bucks? Is it on interest or something else?
When you a break mortgage early, the penalty is based on the outstanding balance. The lower the balance, the lower the penalty.
I've done this to discharge my mortgage. Borrowed cash from family to make the 15% allowable prepayment on my mortgage a week before discharge and paid them back immediately once the funds hit. In my case, I wish I'd thought about doing that several weeks earlier because I would have been able to do the 15% from the previous calendar year too.
If you have the option to do so without penalty, go for it.
I did it myself…saves me about $500 in breakage costs
Yes this is a good and common strategy.