http://mfloan.net/2011/08/10/yield-maintainance-prepayment-premium-should-i-worry/ Your Multi-Family Finance Connection Sun, 29 Apr 2012 18:06:42 +0000 hourly 1 http://wordpress.org/?v=3.0.4 http://mfloan.net/2011/08/10/yield-maintainance-prepayment-premium-should-i-worry/#comment-38 Paul Gellert Mon, 15 Nov 2010 16:07:58 +0000 http://mfloan.net/?p=1375#comment-38 Although people are generally shocked by the cost of their prepayment penalty, they are usually focusing on the wrong thing. They looked at today's rates and thought they could lower their payments, maybe they can. But they most certainly can lock a low rate in for a longer period than the current loan allows. (A coop corp I am working with has a prepayment penalty that is almost 50% of the outstanding balance, but because they can lock a low rate for 15 or 20 years, they are willing to absorb the initial hit. The monthly debt service cost is not increasing because of the lower rate, even with the financing of the prepayment penalty and the closing costs, including the mortgage tax.) Get your clients to focus on the long term and way from the psychological impact of the prepayment penalty. Check the calculators available on LoopNet.com. there are both yield maintenance and defeasance calculators. http://www.loopnet.com/xNet/MainSite/LoopLender/Calculators.aspx?Calculator=yield Although people are generally shocked by the cost of their prepayment penalty, they are usually focusing on the wrong thing. They looked at today’s rates and thought they could lower their payments, maybe they can. But they most certainly can lock a low rate in for a longer period than the current loan allows. (A coop corp I am working with has a prepayment penalty that is almost 50% of the outstanding balance, but because they can lock a low rate for 15 or 20 years, they are willing to absorb the initial hit. The monthly debt service cost is not increasing because of the lower rate, even with the financing of the prepayment penalty and the closing costs, including the mortgage tax.)
Get your clients to focus on the long term and way from the psychological impact of the prepayment penalty.
Check the calculators available on LoopNet.com. there are both yield maintenance and defeasance calculators.
http://www.loopnet.com/xNet/MainSite/LoopLender/Calculators.aspx?Calculator=yield

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