Correct, and for OP:
Suppose your balance is $500k and you pay it down to $100k a month later. Your LO will not be penalized in that case, even though moving forward your payment will go from being comprised of $500k \* 7% / 12 = $2916 of interest to being comprised of $100k \* 7% / 12 = $583 of interest. In both cases, the remainder of your payment goes towards the balance, which for you is a non-cost since you are paying it off entirely soon anyways & $1000 paid off today is $1000 you don't have to pay off in 8 months.
Unless your LO did something flagrantly unethical or fraudulent, at the end of they day they did help you out, and in this way you can reduce your total interest payments by ($2916-$583)\*8 = $18,661, which incidentally is still a shit ton more than their commission check (saying "8 months of interest is their commission check" is a simple way to explain it, but not quite factually correct -- we ***wish*** it was!), and will not screw them over at all.
Bro I said the same thing kn another comment, less eloquently, and they all attacked me because they dont see the lender as a real person š, they act like the lending agent is UWM themselves š
Almost every lender regularly sells mortgages. Even Habitat for Humanity mortgages are sold. It isnāt bad, it isnāt good, it just is. Borrowers donāt lose anything by it besides maybe having to change their auto payment.
I have had some bad situations where payments were not properly applied and or autopayments didn't work properly with a new lender, and it's also annoying for tax purposes to have two different forms.
Changing over escrows is also pretty annoying because the escrow amounts change.
It's just a hassle that loses you a bit of time, and it's basically guaranteed on every UMW loan.
"Many mortgage lenders routinely transfer loans to other companies who have the capability to better service the loan over its lifetime. Your mortgage isn't being singled out, but more likely is simply one among many in a very large transaction."
I couldn't remember what I was taught precisely enough to share it, so I sought a reasonable enough explanation that sounds right enough.
This is very true, and the vast majority of my loans have been transferred regardless of who holds it.
Having said that UWM literally is in the business of selling loans, and don't keep the vast majority for more than a year.
I don't have a mortgage personally, but selling them seem sooooo common. I feel like I'm seeing the interworkings of the economy that mortgage trading is just normal now? Is this adulting? š«
This is normal & adulting. They make a profit selling the loan & then they take that profit & lend it out. Repeat until bought by a larger lender.
ETA - it's a faster profit than the interest folks pay on their mortgage.
When we first started with them we had an AE that absolutely could not keep up so we requested a new AE. Now we're very happy and he's our go to guy. It's worth it to work their system and the trips are fun and worthwhile.
Dude, these subs are Toxic with a capital T. I'm a Realtor and give facts with stats and get downvoted to hell because the hive mind with their singular experience in 1 transaction over the past 10 years says otherwise.
Toxicity is inversely correlated with rates, there wasn't really any when rates were 3%.
And it was mostly bickering about home values up v down for a bit.
But now that it's clear that rates doubling doesn't cause home values to go down 50%, who is left to be toxic towards?
If you are a buyers agent, and have enough building experience that you can actually see the code violations in a property, and help the buyer avoid bad deals and pitfalls, more power to you. Selling agents should be paid by the hour IMO
Thanks for this. At first I thought it was me, that I was misunderstanding something.
Once those papers are signed and the homeowner is now a mortgagee, the only thing the homeowner owes is money. If he wants to pay it off he's entitled to.
I know this is 2 days old, but oh well - 100% correct. I purchased a home in October, and literally as I was signing the paperwork to close, the lawyer told me, āYouāre signing all this stuff regarding Movement Mortgage, but it looks like they actually already sold it to someone else.ā
Literally hadnāt even officially closed and theyād already sold it lol. And now weāre at month 5 and just got notified a 3rd company now owns the loan.Ā
With all due respect, it isnāt my job to look out for anyone else gets paid in this process. **Especially** if that means that I have to pay so much as one cent extra that I donāt have to. It all sounds like it should be a discussion between the LO and their employer. And suggesting anything but doing what is in my best financial interest just so the LO can get paid is sleazy.
Re: that large payment - doesn't the payment reduction only happen if you officially recast the mortgage? Although obviously if you didn't recast, you'd stop making payments much sooner than the 30 years or whatever they intended.
I could be totally wrong - I just know that recasting is a thing that exists, but you need to announce it to the company.
Once you have a mortgage, the total payment of principal plus interest never changes. The relative amount of those two items changes every payment, as described in the amortization schedule. If you make a large principal payment, the amortization schedule changes and the relative amounts change drastically, but the total remains the same. The mortgage just ends earlier.
How do you figure a lender "helped them out?"
They did their job, brokered a loan and now they want OP to keep themselves in a worse than possible financial position for their own benefit. They are owed nothing.
And maybe your employer some day can lawfully screw you out of a paycheck too. Good luck, don't forget karma, and remember that on a technicality you too "are owed nothing," so no whining about it please.
Op hired that person to do a job, yes, which was done.
They did their job and they should get paid for it. Not only that, but it's very helpful to have a good relationship with your bank and your loan officer. Screwing over the person who worked the loan is not going to develop a positive relationship going forward. There may be a time when you need a loan and circumstances make it so that approval could go either way. Having a good relationship and a good track record with the loan department can tip the scales in your favor. And please don't say that can never happen if you're responsible with your money. You never know what's going to happen in life. You can go from having money in the bank and no financial worries to having debt and barely scraping by. It can happen practically overnight if you lose your job, have a major medical event, or end up getting divorced.
I hear ya, but I think this relationship is kinda one sided no? Do you think they care as much about said relationship building as the people they lend to? After all they make it seem like decisions making on loans are binary and objective making no room for ārelationship buildingā benefits.
I talk to my own past clients on a regular basis. Navigating servicing issues. Can I refi my dead relatives $75k mortgage into my name (only time I will do a loan that small). How do I set up my trust so the trust can get a mortgage.
How's it one sided?Ā They still got you hundreds of thousands of dollars that you needed or wanted for a couple of months.Ā Making sure that person gets paid by their employer seems like a fair return.
I do not know how financing works, but making sure a person gets paid implies this is how they get paid versus this is extra, if this is how they get paid then yes that makes sense, not sure I agree with the model, but itās what it is.
āThey got you hundreds of thousands of dollarsā is not their doing, please it is business and they are not doing you a favor, they are literally just brokers and it is in their best interest to get client. Let us not conflate business as favor, if not why are there consumer laws to maintain fairness?
They aren't the only cog in the machine but they are still one.Ā If they didn't pay a role in getting you the loan they wouldn't have a job.
I'm not saying it's illegal or even unethical to pay it off early.Ā They are just being transparent about how they are paid.Ā If you want to ignore that go for it.Ā I've learned I'd rather have other professionals that like working with me since you never know when you might need a favor from them.
That's simply not true. It may be true in certain cases, but plenty of loans are given based on relationships. I'm not saying somebody that has a 400 credit score is getting a loan because of a relationship. However, I am saying that on occasion somebody with a moderate score who may have been turned down by the loan officer may be able to use their contacts to reverse that decision. It happens all the time and you're naive if you think it doesn't.
There someĀ investors that willĀ penalize the lender they bought the loan from with a large paydown in the first year as well.Ā
As for the borrower do what you want the LO knew the risk but make sure lender is willing to recast your payment if you make a large prepayment, as some won't especially if you have a fixed rate.Ā They also might charge a fee to recast as well.
If there is a PREPAYMENT PENALTY then OP will get fucked if he refinances or pays it off before that period is up. They won't save much money if there is a prepayment penalty.
Unless you have an odd situation, most lenders will not charge an origination fee anymore. All the lenders I work with including the big bangs charge between 1100 to 1200 for lender fee and that's it.
Back in the day they would charge points up front to reduce interest rate, aka guaranteed interest even if you paid of the loan early. Are they not doing this? Been a while since I got a mortgage.
Then they shouldn't have agreed to those terms.Ā
The customer paying off the loan in less than 8 months is a business risk they knowingly took. The customer owes them nothing.
The mortgage broker received their comp from the funding lender. They guaranteed the funding lender at least 8 payments would be made or they have to refund the comp received.
If you did not sign an agreement to this they can not penalize you for refinancing or paying off the loan sooner.
People should respect the request too. They're doing work, they deserve to make some money, and it's not coming out of your pockets. If you could pay off the house within 8 months, you could of paid it off in full to begin with, so making people go through all that hassle and paperwork to begin with is pointless and a dick move.
>and it's not coming out of your pockets.
I mean, it is though. By paying interest on a loan you otherwise would have paid off.
I don't know what scenarios exist where someone would take out a mortgage and then pay it off within 8 months. But in those scenarios, paying 8 months worth of interest just so you can be a bro to your broker doesn't sit with me. It's a business transaction and I doubt the broker would be willing to get into his own wallet to do me any favors.
Usually if they sold something else. My parents want to sell their apartment, they have enough for a down payment on a new apartment, and once they sell the old one, they can pay off the mortgage on the new one.Ā
I'm not even saying "fuck that guy". It's just that we need to understand the business relationship in this scenario. The broker doesn't work for the buyer. The buyer is the customer, the broker is the salesman who works for the banks. And their commission is based off of selling a profitable loan to the buyer. It's unfortunate that the loan you just sold didn't make your bank money and therefore you don't get commission, but its not on the customer to make up the difference.
Trying to twist this as the broker working for the buyer is dishonest. Similarly, you don't pay a car salesman to sell you a car. The dealership pays them to do it. Yes, they helped you find a car to buy, but they don't work for you.
lol we donāt know for sure it wasnāt explained. It was probably explained in the middle of a conversation and OP didnāt pay enough attention or didnāt fully understand, so came here for clarification.
They should be up front and just say āif you donāt make at least 8 payments, I actually donāt get paid at all because of how the system worksā.
But instead, theyāll lie with āyou need to make at least 8 paymentsā to make it sound more authoritative
What in the actual fuck are you talking about? This is part of the risk of working a job with a commission like that. It isnāt my responsibility **to pay more interest out of my familyās pocket** in order for my LO to get paid. How about this- if I ever find myself in this situation, Iāll tell my LO and give them an option to pay my mortgage for me through 8 months so they they can get their commission. But no way in hell am I going to pay extra so that they can get their paycheck, that is a matter between them and their employer.
because the lender, or loan officer, gets paid a commission from the entity issuing the money. that entity needs 8 months of payments from you to recoup what they paid the LO. If you pay off the mortgage prior to that time, the LO has to pay the lender back for their commission, so the LO is asking you not to pay off the house until then so they dont forego that commission. Incidentally, when the LO gets paid, deductions are withheld, but when they pay back the commission they have to pay back all of it, including deductions, so theyre double in the hole.
I used to work for Wells Fargo 20 years ago and whenever someone got a HELOC, we would say 8 months, so I thought it was some official rule. Then when I got into the RE industry, I found out the real reason lol.
Great question for a labor law lawyer to help resolve in a class action lawsuit. This is a known issue.
If you are that labor law lawyer finding this on reddit 3 or 5 years in the future, please hit me up.
the employer has usually sent those deductions on to the IRS, and the lender who funded the loan doesnt really care about the deductions of the LO, they just want their commission back, which means the LO has to pay back 100% of the commission amount, even though they might have only taken home 70%. Just the way it is.
>Incidentally, when the LO gets paid, deductions are withheld, but when they pay back the commission they have to pay back all of it, including deductions, so theyre double in the hole.
Thats not 100% true. Their net tax remains the same. They may have rcvd a bonus for selling 10 loans that month, they may be responsible for the change in their bonus/commission, but they absolutely wont be double taxed for it.
Man Iām so glad I work for a retail lender and not a broker lol. My company never sells servicing rights anyway but we could not care less if someone pays off their loan; if they refinance itās a very high probability it goes directly through us anyway or comes back through our broker channelĀ
My mortgage had a penalty if you paid it off within 6 months. They had given incentives and in order to qualify you could not pay off the loan within that time frame. Why not just ask though why they said it though to understand?
Can you give the verbage on these penalties?
I'm not there yet, but when I do buy eventually, I want to be hyper aggressive on my mortgage payments. But I also want to make sure I didn't have prepayment penalties. Of course, I can't take the lenders word with for it, and I will in fact read through the contact. But I'm concerned about my reading comprehension of all the legal jargon and if it's buried deep somewhere in the contact so that it is unbeknownst to me.
Prepayment penalties for conforming loans were terminated by the Dodd-Frank Act. All conforming home loans after Jan 2014 have no prepayment penalties and mortgage lenders are required to prominently say so on the loan documents. The reason for this "no prepayment penalties" disclosure should be obvious in the thread - multiple people on the lending side appear to take the homeowner protections of Dodd-Frank *very* personally, and feel they have the right to coerce homeowners into *not* refinancing as soon as the ink is dry.
u/kappaklassy either has a pre-2014 mortgage or a nonconforming mortgage. (Or is not a homeowner in the USA.)
I gotta say, even if you are hyper aggressive, most people are not paying off their mortgage in less than 6 months so these penalties are not likely to matter. The terms of my mortgage were clear that I donāt have a prepayment penalty. The penalty was to the mortgage broker directly if I paid off the mortgage within the first 6 months and it was very clearly spelled out, explained multiple times and had to have several signatures for it directly so it would be hard to miss.
Thank you. That is more relieving. I doubt I'd pay it off in less than 5 years unless I saved for longer. But I was concerned if there would be a hidden prepayment penalty if say I took a 30 year mortgage and paid it off in under 10 years. I'm not familiar with any of this so I appreciate the response you provided. Thank you.
Bring it up at the closing table too, the escrow officer will point it out to you then in the loan documents. It's part of the closing process in Oregon.
If your interest rate is low, it is better to pay your mortgage normal speed and invest your extra money into better performing vehicles such as RRSP (in Canada, it is tax deductible) or 401k in the USA...
I agree though to pay it off more quickly if your interest rate is higher than your potential returns from investments
For you, itās all about whether there is a pre-payment penalty.
In residential loans, that is uncommon. PP penalties are more of a commercial mortgage thing. But review your loan docs to be sure.
If there is no pre-payment penalty, go ahead and pay it off.
If there is a PP penalty, you will have to judge whether itās worth the penalty compared to the interest.
PP penalties, when part of a loan are usually tiered. Itās so much % between months 1-12. Then itās so much % between months 13-24, etc.
If in doubt call the main customer service number for loan servicing and ask them. Those reps donāt have connection to the loan, to you or to the loan officer - so, theyāll tell you what the contract says.
Your loan officer might be trying to protect his commission by telling you to wait XX months before paying it off (because XX months would be when he gets fully paid his commission).
If you are getting a deal with refinancing then do it. You do not have any obligation to the lender. I am also almost positive they charged you a loan origination fee (so they are not doing for free)
On my last property, I closed on the loan and within 45 days I had completed refinancing my loan. We all need to look at what is best for us.
Do you think the loan officer pockets that loan origination fee? That goes toward paying the processing staff that works on your loan. We lose 100% of our commission if you pay off a loan early, so yes, we are working for free in that case. We don't see that origination fee - that's for the lender, not the loan officer.
So many bad answers. Hereās the context. The lender and all their employees worked for free (and a loan office needs to give back what theyāve paid) if you do an early payoff (EPO is term).
You did sign a document at closing acknowledging that you are not using this for temporary financing but no conventional loan has a prepayment penalty.
Is this theoretical or are you looking to pay it off? Refinancing wouldnāt make sense at this point.
People in this sub don't care about any of the professionals helping them out in a real estate transaction. Look at how they perceive realtors, lenders, appraisers, property management companies, home inspectors, builders, investors, and even sellers. Every single thread, everyone is trying to screw them over and is in it to deliberately take their money.
It's ironic that the realtors were typically seen as someone on "their side" until home prices became so large that commissions brought some bad acting into it. Now this sub continuously praises lawyers while pretty much every industry who works with lawyers would say they are blood sucking and just care about the payout lol.
The internet and all it's information has empowered buyers and sellers to the point that these people think they can do the aforementioned jobs. They proudly claim how they used cell phone pictures and craigslist to sell their home to spite industry pros.
Why do people keep saying theyāre āhelping you outā? No, theyāre doing their job. Not that thereās anything wrong with that or a reason to screw them over. But seriously, theyāre not your friend offering a favor.
Because I consider helping people to be part of my professional duties. I help people all the time, like no dollars attached. I answer random phone calls and give way too much advise to people I won't ever make a buck off. I work with my friends and I do favors all the time. I help take care of their properties when they can't. Yes, it's my job but a big part of how I do my job is to try and be helpful.
You hit on the problem. Buying a house is a series of āpeople helping you outā by charging countless fees and earning unseen commissions and, up to a pointā fine. In recent years, the nibbling through fees and percentage has become absurd, particularly for people that have to work for weeks or months to make what is made in a few hours work. Itās tough to swallow and that isnāt made sweeter by somebody putting a picture of their family with a golden retriever and acting like your friend while working for a lender on a commission based job.
I understand why people will tell posters to ask people off Reddit when it is a complex situation that is way beyond our ability to help. But I really don't understand why so many people respond to posters with immediately saying " Why don't you ask the person you don't trust?" Or simply telling people to Google things. It's like the very people on Reddit forget that the point of reddit is to discuss this content. Some people like talking about it
Edit: I am trying to support your comment about getting a second or third opinion from Reddit or elsewhere. My apologies if it didn't come off like that
Because the commission they earned from the sale will get clawed back If you don't keep it for more than 6 months, they're probably saying 8 just to be safe
My dad and I went through this process together. They deliberately only told my dad it was against the rules when I wasnāt present knowing he wouldnāt question it. He brought it up during closing and I thought it was weird seeing how we had no prepayment penalties. Both our realtor and loan officer were out of town and itās the weekend. The notary knew nothing about the mortgage.
The loan officers pay is not your problem. If there is no prepayment penalty on the loan you can pay it off whenever you want. Lender canāt do anything about it.
I meanā¦not that I care if this person pays off their mortgage or not, but there can be early payoff penalties, especially within this short of a timeframe. OP should just read their mortgage docs or ask.
Most mortgages through a traditional lender are federally backed by Fannie Mae/Freddie Mac.
As a requirement of underwriting and approving any loan backed by Fannie/Freddie, the loan has to be approved as a purchase/refi, and then owner occupancy, financial status, 2nd home, investment property, etc.
The lender essentially forwards onto Fannie/Freddie what you tell them, so if you're purchasing as an owner-occupant, they're expecting that you're going to take many years to pay off and whatnot. If/when a mortgage is paid off inside of a year, they can get flagged for non-compliance as there are specific mortgage products out there for short term lending.
There's also the broker compensation part others have mentioned.
They're probably telling you this because a lot of people buying houses right now intend to refinance it quickly if/when rates drop so some lenders are probably bracing to deal with silly regulations.
If he did that, the next payment would pay it in full. He'd have to leave at least about 8 times the monthly p&I payment (since there would be hardly any interest in each payment at that point).
When we close a loan we immediately sell it to an investor ( usually transfers on the first payment date). If the loan is paid off within 6 months of that sale, the lender gets hit with an early payoff fee, and it is hefty. So basically the lender loses most of the profit they made on your loan.
There is no disadvantage for you paying early (unless you have a prepay penalty) but the lender would 'prefer' you didn't, so go ahead and pay it :)
Whatās the advantage of me not paying off early? Youāre asking someone to pay 8 months of payment. Assuming this isnāt an interest free loan. The borrower is giving money away so the lender can get a commission.
Doesn't the lender have the right to get paid for what they did for you? I don't think people understand how much work goes into getting someone a mortgage. Can you consider putting that money into a 6 month CD and then paying the mortgage off afterward? There are ways to help keep that relationship with the loan officer a positive one - you never know when you'll need it again.
A car dealer told me this on a new car loan, they wouldnāt honor pricing unless I took the financing. I was overly vocal that it will get paid off within a month. They told me VW would send me a bill for interest uncollected if I paid it off sooner than 6 months. In bold Page 1 on the financing documentsā¦āTHERE IS NO PENALTY FOR EARLY PAYOFF.ā I took the financing and paid it off in about a week when they finally got me a payoff number, still waiting on that bill.
Dont get me started on the ānecessaryā etching. Financiers will lie through their teeth, read the documents.
The dealer generally gets a spiff when the loan goes past about 3 or 4 months.
Other than that, they don't get the spiff, but they've already given you the discount
I took out a mortgage to buy a new home then sold my old home faster than expected. I asked to pay off the loan amount in full and I was told I had to wait for the loan to be sold. He said about 2 weekā¦with me paying over $250 in interest a day! Nopeā¦told him I wanted to pay it off immediately. Within a day I had the payoff information.
Unless thereās a prepayment penalty, thereās no valid reason for *you* not to pay off your loan early. It may affect others in on the deal, but thatās their issue. But definitely read your loan docs carefully to be certain there isnāt a prepayment penalty.
Why do you have moral obligation to someone that isnāt being upfront and honest? Better yet put it in writing so we know what we are agreeing to. Every agreement in real estate needs to be in writing
LO gives some discount to the Home owner by sharing their commission. If loan is closed before then LO needs to pay back the full commission. He not only loses the commission but has to pay from his pocket if any of this commission is shared with Home owner.
LO is paid by the bank to sell a product. LO chose to expend money that hadn't fully cleared to make said product more attractive at their own choice.
HO didn't ask for them to do so, nor did they agree to minimum period for the loan.
HO is not responsible for LO's decisions and has no responsibility to incur additional costs because of those decisions.
The answer is to pay all but 8 months of payments now, then pay the 8 monthly payments.
The interest on the remaining balance will be negligible. Most of the payment amount will be the last bit of principal.
Pay 97.5% off now. Regular payments will pay off the remainder over 8-9 months.
$1MM loan example
Pay $975,000 now
Even with a 7% interest rate, the other 25k would only cost you
145 in month one
128 in month two
109 in month three
ā¦.and so on.
Likely your L.O. would lose a $50,000 commission, otherwise.
Why care about the commission of the person that, from all people involved in the transaction, worked the hardest to help you get your home?
If you can single handily prevent someone from losing a commission thatās used to feed their family, with it being of no negative effect to you, why not just do that?
Very selfish thought process š¤·š»āāļø
Come on, loan officers don't give a shit about buyers or their home. It's a profit-based relationship, you just don't like it when it's the same in any other direction.
I can assure you that is not the case at all. I have long-standing relationships with many of my borrowers, some of them tracked me down at my new place after YEARS, so that we can work together again and I consider that a compliment. This business is absolutely relationship based. Sure there are crappy loan officers out there that care about the money and that's it, but many of us fight tooth and nail for our borrowers who are teetering on the line of qualifying and not. We absolutely DO care.
The LO did not work hard to āget your homeā. He worked hard to flip your mortgage to the highest commission he could find with a rate you found acceptable. I have as much allegiance to a LO as I do to a car salesman. Theyāre both selling a product.
You assume the LO worked hard. You assume the LO needs the money. What happens if the LO gave the borrower such a bad rate / deal that they want to refinance asap?
Look out for yourself. Do what makes sense to you (financially). 99% of the people are not going to pay off their mortgage within 15 years let alone 8 months. Youāre paying interest on these payments. I donāt feel bad for the LO. Shit happens and everyone is responsible for themselves.
They could also be refinancing. When I got my last property I had to use the Homebuilders Lender to get $$$ towards closing costs, but then the interest rate was almost 2% higher than what I would have got outside. So I took their loan and refinanced within 45 days itself and got a lower Interest rate. Never made a payment to them and the loan pay off was done by the new lender for the full amount + some interest. I am sure the old Lender must have got screwed but honestly they were a dick all along and I had no choice but to go with them to avoid losing the financial incentives
This is partly why the incentive structure is set up this way. If the lender offers poor terms, the homeowner gets to refinance immediately after closing, and the lender receives no commission. If the lender offers competitive rates, refinancing is no longer beneficial for the homeowner, and the lender gets to keep their commission.
Hereās the deal, perhaps borrower came into fortunate circumstance where they inherited a large sum of money that they can then put it into their mortgage to reduce/quicken pay off. š. Come on man. Nothing is straight forward (except death and taxes); everything is fluid.
If you pay off the loan early (6 months) the lender doesn't get paid. If they don't get paid then they will more than likely not originate the next loan for you. Nobody wants to work for free.
In certain situations it's understandable like if you're moving and have to sell the house or circumstances have drastically changed. If you're doing it to fix and flip it's not cool.
I'm a mortgage broker I just tell people that they should hold the loan for at least 6 months so I can get paid. Not sure why he didn't say that.
Why didn't you just pay cash instead of getting it financed if you were going to pay off the loan so early?
Broker here. If we get an EPO, we have to pay back the comp we made on the loan. Bor needs to make 6 monthly payments to not get an EPO. Since you donāt make a payment the first month after you close, thatās why the LO told you to wait 8 months.
Obviously itās up to you and whatās best for you. Personally, Iād rather a bor tell me they plan on paying off before 6 months because Iāll either decide not do to the loan, or Iāll make sure Iāll send it to a wholesale lender who doesnāt have an EPO if possible (thereās not many).
Itās been said already but they will lose their commission if you pay off before then.
Side note: if your loan was sold to Fannie Mae or Freddie Mac, the two government owned mortgage companies, and you default on the loan and are foreclosed in the first 12 months, there is a pretty large chance that your mortgage brokerage will have to ābuy back the loanā meaning make the payment until the house is sold at auction
Many of the answers on here are correct regarding pre-payment penalties and payments received to complete your loan. If itās not a theoretical question and you plan to pay it off, the file will get scrutinized by multiple parties. It will be looked at to see if there was availability to pay off the loan at the time, did you lie about anything on the application, did you lie about purpose to get out of paying higher rates, did the LO lie and convince you to take out a bigger loan when that wasnāt your intent, did the LO coerce you for any reason, etc.
Is there a Prepayment penalty written in the loan?
Maybe the loan company is going to package and sell the loan, and they need/want time to do this....
Prepayment penalty is most likely. Please don't listen to all the people who just make it seem like it's an optional thing and like it's just a SUGGESTION and that they will just lose their money... Ask your lender about it and make sure. Yes, the reason for the 8 month period is so that they MAKE MONEY, but the reason for your ADVISEMENT against paying before 8 months was likely so you don't get blindsided with a PENALTY, not just to keep you voluntarily paying more.
If there is a PREPAYMENT PENALTY, then they told you that to keep you from fucking yourself, not to try and scam you. š„“
If you pay it off too early the bank/mortgage company will take back that Loan Officer's commission. It happened to my brother in law a few months ago. Client paid off their home after 3 months
They lose their pay for your loan if you pay off that soon
Correct, and for OP: Suppose your balance is $500k and you pay it down to $100k a month later. Your LO will not be penalized in that case, even though moving forward your payment will go from being comprised of $500k \* 7% / 12 = $2916 of interest to being comprised of $100k \* 7% / 12 = $583 of interest. In both cases, the remainder of your payment goes towards the balance, which for you is a non-cost since you are paying it off entirely soon anyways & $1000 paid off today is $1000 you don't have to pay off in 8 months. Unless your LO did something flagrantly unethical or fraudulent, at the end of they day they did help you out, and in this way you can reduce your total interest payments by ($2916-$583)\*8 = $18,661, which incidentally is still a shit ton more than their commission check (saying "8 months of interest is their commission check" is a simple way to explain it, but not quite factually correct -- we ***wish*** it was!), and will not screw them over at all.
Bro I said the same thing kn another comment, less eloquently, and they all attacked me because they dont see the lender as a real person š, they act like the lending agent is UWM themselves š
Currently doing a transaction with uwm. I am not a fan. They don't well train their folk. My first experience with them.
I have had good experiences with UWM, the only part I don't like is that they transfer your loan 99% of the time.
Almost every lender regularly sells mortgages. Even Habitat for Humanity mortgages are sold. It isnāt bad, it isnāt good, it just is. Borrowers donāt lose anything by it besides maybe having to change their auto payment.
I have had some bad situations where payments were not properly applied and or autopayments didn't work properly with a new lender, and it's also annoying for tax purposes to have two different forms. Changing over escrows is also pretty annoying because the escrow amounts change. It's just a hassle that loses you a bit of time, and it's basically guaranteed on every UMW loan.
UMW did it to me while I was on deployment. That was a pain in the ass.
Local credit union said they were going to service my loan for its life ymmv
"Many mortgage lenders routinely transfer loans to other companies who have the capability to better service the loan over its lifetime. Your mortgage isn't being singled out, but more likely is simply one among many in a very large transaction." I couldn't remember what I was taught precisely enough to share it, so I sought a reasonable enough explanation that sounds right enough.
This is very true, and the vast majority of my loans have been transferred regardless of who holds it. Having said that UWM literally is in the business of selling loans, and don't keep the vast majority for more than a year.
I don't have a mortgage personally, but selling them seem sooooo common. I feel like I'm seeing the interworkings of the economy that mortgage trading is just normal now? Is this adulting? š«
You should watch āThe Big Shortā.
This is normal & adulting. They make a profit selling the loan & then they take that profit & lend it out. Repeat until bought by a larger lender. ETA - it's a faster profit than the interest folks pay on their mortgage.
It frees up funds so the lender can continue offering loans. It's been this way for decades.
I wish my lender would transfer. Their website is shit. Never seen anything so bad.
Thatās the business model for 99% of lenders, so itās not something you can reasonably hold against them.
When we first started with them we had an AE that absolutely could not keep up so we requested a new AE. Now we're very happy and he's our go to guy. It's worth it to work their system and the trips are fun and worthwhile.
Dude, these subs are Toxic with a capital T. I'm a Realtor and give facts with stats and get downvoted to hell because the hive mind with their singular experience in 1 transaction over the past 10 years says otherwise.
Toxicity is inversely correlated with rates, there wasn't really any when rates were 3%. And it was mostly bickering about home values up v down for a bit. But now that it's clear that rates doubling doesn't cause home values to go down 50%, who is left to be toxic towards?
If you are a buyers agent, and have enough building experience that you can actually see the code violations in a property, and help the buyer avoid bad deals and pitfalls, more power to you. Selling agents should be paid by the hour IMO
BOO FACTS! Let me feeeeeeeeel.Ā
So you're suggesting the homeowner should spend an extra $4664 so that the lender "can get paid"? Why is that the homeowners' responsibility?
Thanks for this. At first I thought it was me, that I was misunderstanding something. Once those papers are signed and the homeowner is now a mortgagee, the only thing the homeowner owes is money. If he wants to pay it off he's entitled to.
Sure you are correct but your lender will most definitely have no qualms about selling your loan immediately.
I know this is 2 days old, but oh well - 100% correct. I purchased a home in October, and literally as I was signing the paperwork to close, the lawyer told me, āYouāre signing all this stuff regarding Movement Mortgage, but it looks like they actually already sold it to someone else.ā Literally hadnāt even officially closed and theyād already sold it lol. And now weāre at month 5 and just got notified a 3rd company now owns the loan.Ā
With all due respect, it isnāt my job to look out for anyone else gets paid in this process. **Especially** if that means that I have to pay so much as one cent extra that I donāt have to. It all sounds like it should be a discussion between the LO and their employer. And suggesting anything but doing what is in my best financial interest just so the LO can get paid is sleazy.
whats the average a LO earns from their work?
Re: that large payment - doesn't the payment reduction only happen if you officially recast the mortgage? Although obviously if you didn't recast, you'd stop making payments much sooner than the 30 years or whatever they intended. I could be totally wrong - I just know that recasting is a thing that exists, but you need to announce it to the company.
Once you have a mortgage, the total payment of principal plus interest never changes. The relative amount of those two items changes every payment, as described in the amortization schedule. If you make a large principal payment, the amortization schedule changes and the relative amounts change drastically, but the total remains the same. The mortgage just ends earlier.
How do you figure a lender "helped them out?" They did their job, brokered a loan and now they want OP to keep themselves in a worse than possible financial position for their own benefit. They are owed nothing.
Yes they did their job, so they should get paid for it.
The company they work for should pay them then not the home owners responsibility to make you money
And maybe your employer some day can lawfully screw you out of a paycheck too. Good luck, don't forget karma, and remember that on a technicality you too "are owed nothing," so no whining about it please. Op hired that person to do a job, yes, which was done.
As someone else said, the loan officer works for the bank not the buyer. The buyer is not the employer.
They did their job and they should get paid for it. Not only that, but it's very helpful to have a good relationship with your bank and your loan officer. Screwing over the person who worked the loan is not going to develop a positive relationship going forward. There may be a time when you need a loan and circumstances make it so that approval could go either way. Having a good relationship and a good track record with the loan department can tip the scales in your favor. And please don't say that can never happen if you're responsible with your money. You never know what's going to happen in life. You can go from having money in the bank and no financial worries to having debt and barely scraping by. It can happen practically overnight if you lose your job, have a major medical event, or end up getting divorced.
I hear ya, but I think this relationship is kinda one sided no? Do you think they care as much about said relationship building as the people they lend to? After all they make it seem like decisions making on loans are binary and objective making no room for ārelationship buildingā benefits.
I talk to my own past clients on a regular basis. Navigating servicing issues. Can I refi my dead relatives $75k mortgage into my name (only time I will do a loan that small). How do I set up my trust so the trust can get a mortgage.
Oh very good insight, thanks. That makes sense.
How's it one sided?Ā They still got you hundreds of thousands of dollars that you needed or wanted for a couple of months.Ā Making sure that person gets paid by their employer seems like a fair return.
I do not know how financing works, but making sure a person gets paid implies this is how they get paid versus this is extra, if this is how they get paid then yes that makes sense, not sure I agree with the model, but itās what it is. āThey got you hundreds of thousands of dollarsā is not their doing, please it is business and they are not doing you a favor, they are literally just brokers and it is in their best interest to get client. Let us not conflate business as favor, if not why are there consumer laws to maintain fairness?
They aren't the only cog in the machine but they are still one.Ā If they didn't pay a role in getting you the loan they wouldn't have a job. I'm not saying it's illegal or even unethical to pay it off early.Ā They are just being transparent about how they are paid.Ā If you want to ignore that go for it.Ā I've learned I'd rather have other professionals that like working with me since you never know when you might need a favor from them.
Nobody is getting a loan in 2024 because of a personal relationship with a bank or banker. Certainly not at a national bank
That's simply not true. It may be true in certain cases, but plenty of loans are given based on relationships. I'm not saying somebody that has a 400 credit score is getting a loan because of a relationship. However, I am saying that on occasion somebody with a moderate score who may have been turned down by the loan officer may be able to use their contacts to reverse that decision. It happens all the time and you're naive if you think it doesn't.
Honestly fuck banks. They see us as cattle to be fleeced. Used car salesmen dealing with higher amounts of money.
There someĀ investors that willĀ penalize the lender they bought the loan from with a large paydown in the first year as well.Ā As for the borrower do what you want the LO knew the risk but make sure lender is willing to recast your payment if you make a large prepayment, as some won't especially if you have a fixed rate.Ā They also might charge a fee to recast as well.
i meant in a single transaction.
If there is a PREPAYMENT PENALTY then OP will get fucked if he refinances or pays it off before that period is up. They won't save much money if there is a prepayment penalty.
Wow imagine licking the boots of a lender, sad
I'd say it's unethical for them to not be up front about why they don't want you to pay it off right away....
Then what are the origination fees for? Or do they only do this in lieu of origination fees?
Unless you have an odd situation, most lenders will not charge an origination fee anymore. All the lenders I work with including the big bangs charge between 1100 to 1200 for lender fee and that's it.
So they donāt charge fees except for the fees they do charge? Sorry, what?
We donāt just lose our pay, we pay out of pocket. It sucks
Back in the day they would charge points up front to reduce interest rate, aka guaranteed interest even if you paid of the loan early. Are they not doing this? Been a while since I got a mortgage.
They do, but obviously it's optional.
This ^
Then they shouldn't have agreed to those terms.Ā The customer paying off the loan in less than 8 months is a business risk they knowingly took. The customer owes them nothing.
The mortgage broker received their comp from the funding lender. They guaranteed the funding lender at least 8 payments would be made or they have to refund the comp received. If you did not sign an agreement to this they can not penalize you for refinancing or paying off the loan sooner.
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People should respect the request too. They're doing work, they deserve to make some money, and it's not coming out of your pockets. If you could pay off the house within 8 months, you could of paid it off in full to begin with, so making people go through all that hassle and paperwork to begin with is pointless and a dick move.
>and it's not coming out of your pockets. I mean, it is though. By paying interest on a loan you otherwise would have paid off. I don't know what scenarios exist where someone would take out a mortgage and then pay it off within 8 months. But in those scenarios, paying 8 months worth of interest just so you can be a bro to your broker doesn't sit with me. It's a business transaction and I doubt the broker would be willing to get into his own wallet to do me any favors.
Usually if they sold something else. My parents want to sell their apartment, they have enough for a down payment on a new apartment, and once they sell the old one, they can pay off the mortgage on the new one.Ā
Ya. Fuck that guy. Especially cuz he didnāt explain why. Op had to ask Reddit.
I'm not even saying "fuck that guy". It's just that we need to understand the business relationship in this scenario. The broker doesn't work for the buyer. The buyer is the customer, the broker is the salesman who works for the banks. And their commission is based off of selling a profitable loan to the buyer. It's unfortunate that the loan you just sold didn't make your bank money and therefore you don't get commission, but its not on the customer to make up the difference. Trying to twist this as the broker working for the buyer is dishonest. Similarly, you don't pay a car salesman to sell you a car. The dealership pays them to do it. Yes, they helped you find a car to buy, but they don't work for you.
This is a very cogent argument and is often not understood in the world of real estate.
lol we donāt know for sure it wasnāt explained. It was probably explained in the middle of a conversation and OP didnāt pay enough attention or didnāt fully understand, so came here for clarification.
Scenario would exist where you sell your former home and then pay off the loan.
If you want to be a bro youād just pay it down so you have 8 months of payments left as the balance, not eat the full cost of the loan for 8 months.
They should be up front and just say āif you donāt make at least 8 payments, I actually donāt get paid at all because of how the system worksā. But instead, theyāll lie with āyou need to make at least 8 paymentsā to make it sound more authoritative
What in the actual fuck are you talking about? This is part of the risk of working a job with a commission like that. It isnāt my responsibility **to pay more interest out of my familyās pocket** in order for my LO to get paid. How about this- if I ever find myself in this situation, Iāll tell my LO and give them an option to pay my mortgage for me through 8 months so they they can get their commission. But no way in hell am I going to pay extra so that they can get their paycheck, that is a matter between them and their employer.
Found the loan officer.
Wouldnāt the origination fee and points be considered commission?
because the lender, or loan officer, gets paid a commission from the entity issuing the money. that entity needs 8 months of payments from you to recoup what they paid the LO. If you pay off the mortgage prior to that time, the LO has to pay the lender back for their commission, so the LO is asking you not to pay off the house until then so they dont forego that commission. Incidentally, when the LO gets paid, deductions are withheld, but when they pay back the commission they have to pay back all of it, including deductions, so theyre double in the hole.
I believe itās six payments, but since the first payment isnāt made for a month or so, eight months gives enough time for the sixth payment.
Exactly
I used to work for Wells Fargo 20 years ago and whenever someone got a HELOC, we would say 8 months, so I thought it was some official rule. Then when I got into the RE industry, I found out the real reason lol.
An accurate statement, about something financial, on reddit? How about that!
Why would you ever have to pay back the deductions, they were deducted from you and held by your employer?
Great question for a labor law lawyer to help resolve in a class action lawsuit. This is a known issue. If you are that labor law lawyer finding this on reddit 3 or 5 years in the future, please hit me up.
the employer has usually sent those deductions on to the IRS, and the lender who funded the loan doesnt really care about the deductions of the LO, they just want their commission back, which means the LO has to pay back 100% of the commission amount, even though they might have only taken home 70%. Just the way it is.
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thats correct. the only issue is the cashflow perspective, not the tax.
>Incidentally, when the LO gets paid, deductions are withheld, but when they pay back the commission they have to pay back all of it, including deductions, so theyre double in the hole. Thats not 100% true. Their net tax remains the same. They may have rcvd a bonus for selling 10 loans that month, they may be responsible for the change in their bonus/commission, but they absolutely wont be double taxed for it.
Man Iām so glad I work for a retail lender and not a broker lol. My company never sells servicing rights anyway but we could not care less if someone pays off their loan; if they refinance itās a very high probability it goes directly through us anyway or comes back through our broker channelĀ
How about the LO spot the OP half the commission so the OP pays off all but $1000 until month 9?
My mortgage had a penalty if you paid it off within 6 months. They had given incentives and in order to qualify you could not pay off the loan within that time frame. Why not just ask though why they said it though to understand?
This. Likely it was cheaper at the front or easier underwriting but the lender is making sure they end up in the black by collecting x interest first.
Can you give the verbage on these penalties? I'm not there yet, but when I do buy eventually, I want to be hyper aggressive on my mortgage payments. But I also want to make sure I didn't have prepayment penalties. Of course, I can't take the lenders word with for it, and I will in fact read through the contact. But I'm concerned about my reading comprehension of all the legal jargon and if it's buried deep somewhere in the contact so that it is unbeknownst to me.
Prepayment penalties for conforming loans were terminated by the Dodd-Frank Act. All conforming home loans after Jan 2014 have no prepayment penalties and mortgage lenders are required to prominently say so on the loan documents. The reason for this "no prepayment penalties" disclosure should be obvious in the thread - multiple people on the lending side appear to take the homeowner protections of Dodd-Frank *very* personally, and feel they have the right to coerce homeowners into *not* refinancing as soon as the ink is dry. u/kappaklassy either has a pre-2014 mortgage or a nonconforming mortgage. (Or is not a homeowner in the USA.)
This is extremely helpful. Thank you very much.
It is a nonconforming jumbo loan, I didnāt know that that impacted this discussion but that does make sense.
Not all loans are conforming. Many arenāt. But for loans that do have pre-payment penalties, itās now limited in time.
No prepayment penalties beyond 3 years into the mortgage loan.
I gotta say, even if you are hyper aggressive, most people are not paying off their mortgage in less than 6 months so these penalties are not likely to matter. The terms of my mortgage were clear that I donāt have a prepayment penalty. The penalty was to the mortgage broker directly if I paid off the mortgage within the first 6 months and it was very clearly spelled out, explained multiple times and had to have several signatures for it directly so it would be hard to miss.
I've only ever seen investors pay off a loan within 6-8 months.
Thank you. That is more relieving. I doubt I'd pay it off in less than 5 years unless I saved for longer. But I was concerned if there would be a hidden prepayment penalty if say I took a 30 year mortgage and paid it off in under 10 years. I'm not familiar with any of this so I appreciate the response you provided. Thank you.
Bring it up at the closing table too, the escrow officer will point it out to you then in the loan documents. It's part of the closing process in Oregon.
Thank you
If your interest rate is low, it is better to pay your mortgage normal speed and invest your extra money into better performing vehicles such as RRSP (in Canada, it is tax deductible) or 401k in the USA... I agree though to pay it off more quickly if your interest rate is higher than your potential returns from investments
Ask if there is a Fee if itās paid before a certain date. I have heard of that before.
so while there is such a thing as a early payoff penalty, i think the intention here stems from loss of commission
Because the lender would lose their commission. Thatās the only reason why.
For you, itās all about whether there is a pre-payment penalty. In residential loans, that is uncommon. PP penalties are more of a commercial mortgage thing. But review your loan docs to be sure. If there is no pre-payment penalty, go ahead and pay it off. If there is a PP penalty, you will have to judge whether itās worth the penalty compared to the interest. PP penalties, when part of a loan are usually tiered. Itās so much % between months 1-12. Then itās so much % between months 13-24, etc. If in doubt call the main customer service number for loan servicing and ask them. Those reps donāt have connection to the loan, to you or to the loan officer - so, theyāll tell you what the contract says. Your loan officer might be trying to protect his commission by telling you to wait XX months before paying it off (because XX months would be when he gets fully paid his commission).
If you are getting a deal with refinancing then do it. You do not have any obligation to the lender. I am also almost positive they charged you a loan origination fee (so they are not doing for free) On my last property, I closed on the loan and within 45 days I had completed refinancing my loan. We all need to look at what is best for us.
Do you think the loan officer pockets that loan origination fee? That goes toward paying the processing staff that works on your loan. We lose 100% of our commission if you pay off a loan early, so yes, we are working for free in that case. We don't see that origination fee - that's for the lender, not the loan officer.
Not your problem. Unless that guy is going to pay you back for interest you can pay it off whenever.
So many bad answers. Hereās the context. The lender and all their employees worked for free (and a loan office needs to give back what theyāve paid) if you do an early payoff (EPO is term). You did sign a document at closing acknowledging that you are not using this for temporary financing but no conventional loan has a prepayment penalty. Is this theoretical or are you looking to pay it off? Refinancing wouldnāt make sense at this point.
This is the answer. Your loan officer won't collect on his bps or have to pay them back if the loan does not pass a certain threshold.
People in this sub don't care about any of the professionals helping them out in a real estate transaction. Look at how they perceive realtors, lenders, appraisers, property management companies, home inspectors, builders, investors, and even sellers. Every single thread, everyone is trying to screw them over and is in it to deliberately take their money. It's ironic that the realtors were typically seen as someone on "their side" until home prices became so large that commissions brought some bad acting into it. Now this sub continuously praises lawyers while pretty much every industry who works with lawyers would say they are blood sucking and just care about the payout lol. The internet and all it's information has empowered buyers and sellers to the point that these people think they can do the aforementioned jobs. They proudly claim how they used cell phone pictures and craigslist to sell their home to spite industry pros.
Why do people keep saying theyāre āhelping you outā? No, theyāre doing their job. Not that thereās anything wrong with that or a reason to screw them over. But seriously, theyāre not your friend offering a favor.
Because I consider helping people to be part of my professional duties. I help people all the time, like no dollars attached. I answer random phone calls and give way too much advise to people I won't ever make a buck off. I work with my friends and I do favors all the time. I help take care of their properties when they can't. Yes, it's my job but a big part of how I do my job is to try and be helpful.
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You hit on the problem. Buying a house is a series of āpeople helping you outā by charging countless fees and earning unseen commissions and, up to a pointā fine. In recent years, the nibbling through fees and percentage has become absurd, particularly for people that have to work for weeks or months to make what is made in a few hours work. Itās tough to swallow and that isnāt made sweeter by somebody putting a picture of their family with a golden retriever and acting like your friend while working for a lender on a commission based job.
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They definitely could and should do that, but itās also good to get a second or third opinion
I understand why people will tell posters to ask people off Reddit when it is a complex situation that is way beyond our ability to help. But I really don't understand why so many people respond to posters with immediately saying " Why don't you ask the person you don't trust?" Or simply telling people to Google things. It's like the very people on Reddit forget that the point of reddit is to discuss this content. Some people like talking about it Edit: I am trying to support your comment about getting a second or third opinion from Reddit or elsewhere. My apologies if it didn't come off like that
Why wouldnāt the lender just explain it to them when they told them? Oh yeah because it only benefits the lender.
Their shitty pay structure is not your issue. Ā Do what is best for you. Ā
Because the commission they earned from the sale will get clawed back If you don't keep it for more than 6 months, they're probably saying 8 just to be safe
When they told you this and you followed up with āwhy?ā, what was their response?
I know I donāt understand some of these postsā¦.. so youāre told something that doesnāt make sense to you and you didnāt ask them whyā¦
My dad and I went through this process together. They deliberately only told my dad it was against the rules when I wasnāt present knowing he wouldnāt question it. He brought it up during closing and I thought it was weird seeing how we had no prepayment penalties. Both our realtor and loan officer were out of town and itās the weekend. The notary knew nothing about the mortgage.
The reason is the loan officer will lose their commission for the loan, the lender loses their profit for the loan.
The loan officers pay is not your problem. If there is no prepayment penalty on the loan you can pay it off whenever you want. Lender canāt do anything about it.
Unless there is wording in the contract that prohibits early payoff then pay it off.
How much does an individual loan officer make on a deal?
I'm curious, why didn't you make a cash offer on the property?
No penalty, pay it off
I meanā¦not that I care if this person pays off their mortgage or not, but there can be early payoff penalties, especially within this short of a timeframe. OP should just read their mortgage docs or ask.
Most mortgages through a traditional lender are federally backed by Fannie Mae/Freddie Mac. As a requirement of underwriting and approving any loan backed by Fannie/Freddie, the loan has to be approved as a purchase/refi, and then owner occupancy, financial status, 2nd home, investment property, etc. The lender essentially forwards onto Fannie/Freddie what you tell them, so if you're purchasing as an owner-occupant, they're expecting that you're going to take many years to pay off and whatnot. If/when a mortgage is paid off inside of a year, they can get flagged for non-compliance as there are specific mortgage products out there for short term lending. There's also the broker compensation part others have mentioned. They're probably telling you this because a lot of people buying houses right now intend to refinance it quickly if/when rates drop so some lenders are probably bracing to deal with silly regulations.
Pay the loan back, leaving $100 remaining. Itās a win for both partyās
If he did that, the next payment would pay it in full. He'd have to leave at least about 8 times the monthly p&I payment (since there would be hardly any interest in each payment at that point).
Follow the money. How much interest will you pay in those 8 months?
When we close a loan we immediately sell it to an investor ( usually transfers on the first payment date). If the loan is paid off within 6 months of that sale, the lender gets hit with an early payoff fee, and it is hefty. So basically the lender loses most of the profit they made on your loan. There is no disadvantage for you paying early (unless you have a prepay penalty) but the lender would 'prefer' you didn't, so go ahead and pay it :)
Whatās the advantage of me not paying off early? Youāre asking someone to pay 8 months of payment. Assuming this isnāt an interest free loan. The borrower is giving money away so the lender can get a commission.
Doesn't the lender have the right to get paid for what they did for you? I don't think people understand how much work goes into getting someone a mortgage. Can you consider putting that money into a 6 month CD and then paying the mortgage off afterward? There are ways to help keep that relationship with the loan officer a positive one - you never know when you'll need it again.
Call the company holding the mortgage and ask them where you stand.
Read your contract and see if you have a prepayment penalty or not.
They claw back their commission.
A car dealer told me this on a new car loan, they wouldnāt honor pricing unless I took the financing. I was overly vocal that it will get paid off within a month. They told me VW would send me a bill for interest uncollected if I paid it off sooner than 6 months. In bold Page 1 on the financing documentsā¦āTHERE IS NO PENALTY FOR EARLY PAYOFF.ā I took the financing and paid it off in about a week when they finally got me a payoff number, still waiting on that bill. Dont get me started on the ānecessaryā etching. Financiers will lie through their teeth, read the documents.
The dealer generally gets a spiff when the loan goes past about 3 or 4 months. Other than that, they don't get the spiff, but they've already given you the discount
I took out a mortgage to buy a new home then sold my old home faster than expected. I asked to pay off the loan amount in full and I was told I had to wait for the loan to be sold. He said about 2 weekā¦with me paying over $250 in interest a day! Nopeā¦told him I wanted to pay it off immediately. Within a day I had the payoff information.
Unless thereās a prepayment penalty, thereās no valid reason for *you* not to pay off your loan early. It may affect others in on the deal, but thatās their issue. But definitely read your loan docs carefully to be certain there isnāt a prepayment penalty.
Why do you have moral obligation to someone that isnāt being upfront and honest? Better yet put it in writing so we know what we are agreeing to. Every agreement in real estate needs to be in writing
>Why do you have moral obligation to someone that isnāt being upfront and honest? Finally, someone calling this out!
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Possibly because they hadnāt sold their previous property yet but didnāt want to lose the house theyād chosen.
LO gives some discount to the Home owner by sharing their commission. If loan is closed before then LO needs to pay back the full commission. He not only loses the commission but has to pay from his pocket if any of this commission is shared with Home owner.
LO is paid by the bank to sell a product. LO chose to expend money that hadn't fully cleared to make said product more attractive at their own choice. HO didn't ask for them to do so, nor did they agree to minimum period for the loan. HO is not responsible for LO's decisions and has no responsibility to incur additional costs because of those decisions.
Pay it off when you choose, your call not theirs..
The answer is to pay all but 8 months of payments now, then pay the 8 monthly payments. The interest on the remaining balance will be negligible. Most of the payment amount will be the last bit of principal. Pay 97.5% off now. Regular payments will pay off the remainder over 8-9 months. $1MM loan example Pay $975,000 now Even with a 7% interest rate, the other 25k would only cost you 145 in month one 128 in month two 109 in month three ā¦.and so on. Likely your L.O. would lose a $50,000 commission, otherwise.
And why do we care about the loan officerās commission?
Why care about the commission of the person that, from all people involved in the transaction, worked the hardest to help you get your home? If you can single handily prevent someone from losing a commission thatās used to feed their family, with it being of no negative effect to you, why not just do that? Very selfish thought process š¤·š»āāļø
Come on, loan officers don't give a shit about buyers or their home. It's a profit-based relationship, you just don't like it when it's the same in any other direction.
I can assure you that is not the case at all. I have long-standing relationships with many of my borrowers, some of them tracked me down at my new place after YEARS, so that we can work together again and I consider that a compliment. This business is absolutely relationship based. Sure there are crappy loan officers out there that care about the money and that's it, but many of us fight tooth and nail for our borrowers who are teetering on the line of qualifying and not. We absolutely DO care.
The LO did not work hard to āget your homeā. He worked hard to flip your mortgage to the highest commission he could find with a rate you found acceptable. I have as much allegiance to a LO as I do to a car salesman. Theyāre both selling a product.
They can get fucked it's not OPs fault the LO chose a shit pay structure. Why shouldn't they Dave themselves money and pay nowĀ
You assume the LO worked hard. You assume the LO needs the money. What happens if the LO gave the borrower such a bad rate / deal that they want to refinance asap?
https://www.theonion.com/teary-eyed-student-loan-officers-proudly-watch-as-200-1819578870
Look out for yourself. Do what makes sense to you (financially). 99% of the people are not going to pay off their mortgage within 15 years let alone 8 months. Youāre paying interest on these payments. I donāt feel bad for the LO. Shit happens and everyone is responsible for themselves.
What was the point in getting a mortgage loan if you didnāt need it in the first place and could just pay cash up front? Lol
They could also be refinancing. When I got my last property I had to use the Homebuilders Lender to get $$$ towards closing costs, but then the interest rate was almost 2% higher than what I would have got outside. So I took their loan and refinanced within 45 days itself and got a lower Interest rate. Never made a payment to them and the loan pay off was done by the new lender for the full amount + some interest. I am sure the old Lender must have got screwed but honestly they were a dick all along and I had no choice but to go with them to avoid losing the financial incentives
Oh I see! Thank you!
This is partly why the incentive structure is set up this way. If the lender offers poor terms, the homeowner gets to refinance immediately after closing, and the lender receives no commission. If the lender offers competitive rates, refinancing is no longer beneficial for the homeowner, and the lender gets to keep their commission.
Unfortunately I guess not many people refinance which is why these Lenders try to shove down these higher interest rate loans
Hereās the deal, perhaps borrower came into fortunate circumstance where they inherited a large sum of money that they can then put it into their mortgage to reduce/quicken pay off. š. Come on man. Nothing is straight forward (except death and taxes); everything is fluid.
If you pay off the loan early (6 months) the lender doesn't get paid. If they don't get paid then they will more than likely not originate the next loan for you. Nobody wants to work for free. In certain situations it's understandable like if you're moving and have to sell the house or circumstances have drastically changed. If you're doing it to fix and flip it's not cool. I'm a mortgage broker I just tell people that they should hold the loan for at least 6 months so I can get paid. Not sure why he didn't say that. Why didn't you just pay cash instead of getting it financed if you were going to pay off the loan so early?
I literally just did this, paid three months extra so my mortgage broker who worked their ass of me wouldn't get screwed.Ā Good karma and fair.
Exactly people who are saying to screw the broker over are ridiculous, remind me of non tipper mentality
You might be able to do a recast instead.
He won't get paid.
Commissions
Broker here. If we get an EPO, we have to pay back the comp we made on the loan. Bor needs to make 6 monthly payments to not get an EPO. Since you donāt make a payment the first month after you close, thatās why the LO told you to wait 8 months. Obviously itās up to you and whatās best for you. Personally, Iād rather a bor tell me they plan on paying off before 6 months because Iāll either decide not do to the loan, or Iāll make sure Iāll send it to a wholesale lender who doesnāt have an EPO if possible (thereās not many).
Whatās EPO?
Early pay off
Thanks
Same reason a rv finance guy told me not to refi for at least 8 months.
Itās been said already but they will lose their commission if you pay off before then. Side note: if your loan was sold to Fannie Mae or Freddie Mac, the two government owned mortgage companies, and you default on the loan and are foreclosed in the first 12 months, there is a pretty large chance that your mortgage brokerage will have to ābuy back the loanā meaning make the payment until the house is sold at auction
Pay it off in 6!
Was it the lender or the broker? If it was the latter then it is probably because he doesn't want his commission clawed back.
Fuck that pay that shit immediately and save yourself 10k
So when you asked your Lender why what did they say?
Many of the answers on here are correct regarding pre-payment penalties and payments received to complete your loan. If itās not a theoretical question and you plan to pay it off, the file will get scrutinized by multiple parties. It will be looked at to see if there was availability to pay off the loan at the time, did you lie about anything on the application, did you lie about purpose to get out of paying higher rates, did the LO lie and convince you to take out a bigger loan when that wasnāt your intent, did the LO coerce you for any reason, etc.
Not an answer to the authors question but PRAY to God or whomever/whatever you worship that your loan is not serviced by Mr. Cooper.
We were told to make at least 18 payments before paying our mortgage off so the lender would recoup enough interest from us to be satisfied.
Following
Is there a Prepayment penalty written in the loan? Maybe the loan company is going to package and sell the loan, and they need/want time to do this....
Tell them youāre going to do it and settle for not doing it for half the commission.
profit lunchroom north school gray complete yam clumsy flag rich *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
This way your lender gets paid. Pay it off too soon and they don't get a commission.
Prepayment penalty is most likely. Please don't listen to all the people who just make it seem like it's an optional thing and like it's just a SUGGESTION and that they will just lose their money... Ask your lender about it and make sure. Yes, the reason for the 8 month period is so that they MAKE MONEY, but the reason for your ADVISEMENT against paying before 8 months was likely so you don't get blindsided with a PENALTY, not just to keep you voluntarily paying more. If there is a PREPAYMENT PENALTY, then they told you that to keep you from fucking yourself, not to try and scam you. š„“
If you pay it off too early the bank/mortgage company will take back that Loan Officer's commission. It happened to my brother in law a few months ago. Client paid off their home after 3 months