Yes, in most cases you do need to pay a penalty. The penalty is different for each bank. The usual scenario is when a ban would charge you 3 month mortgage interest which is about $1000 for every 100,000 borrowed. So if your mortgage is 400,000 you would be paying close to 4000$ in penalty to break the mortgage. If you sold your house and planing to buy another one, you should talk to you bank to see if they will be able to move the mortgage to another property which is called "porting". If the mortgage you require is bigger you can reapply to get a higher mortgage and could have a blend mortgage where your additional amount has a different rate then the original mortgage.

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Hi, to buy new house i took heloc against my old house which i planned to sell shortly to pay off heloc. i could not sell my old house so i am using it as rental property now. i want to convert heloc into fixed rate secondary mortgage. if i convert heloc into fixed rate mortgage, when i sell my rental property will the money from sale be transferred to my primary mortgage company without lump sum distribution to avoid tax penalty? thank you

You might be able to convert the heloc, but two items, one the rate on home equity loans are usually high, and two, home equities are tougher to come by, especially on a rental property. you could look into locking the rate like mary suggested, it depends on the lender and when you took out the heloc as the lock in feature has only been around for a few years. If you sell the rental, any proceeds will be given to you, other arrangements I would consult the irs or a cpa. you may want to look at bank of america for the home equity, I was just talking to a broker contact of mine and she claims they are doing home equities still, best of luck

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I've been in my house for about a year now and may have a career change. i was told some lenders may impose a penalty for selling your house too soon. if so, what is the typical penalty? i still need to go over my mortgage papers to find this out. it's also a thirty year loan, not sure if this matters.

In most cases there is no penalty in sales you home or paying the mortgage off early. But you need to read YOUR mortgage to be sure.

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I have a 2yr prepayment penalty and we did 100% financing when we bought the house. my husband commutes over 50 miles oneway to work and i am looking for work and his paycheck barely pays the mortgage and we don't have enough left over for the other bills. should we sell the house or rent it out. our mortgage payment is $4100/month we have a 5br 4ba house with 3300sqft.

Sell it.You will not be able to afford the taxes at the end of the year.

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My son & partner have 1 year left of a 5 year fixed term mortgage.they have just sold house due to relationship breakdown but have been told they are liable for £6k repayment penalty. i think i heard somewhere that if the loan is kept open with say £1000 until the term finishes this is a loophole to avoid the repayment penalty has anyone done this?

Once you've sold the house you have to repay the entire loan, so its now too late. Keeping the account open with a minimal amount is OK if the only penalty is for a complete repayment, and you still have the house (eg because you've come into some money and want to pay off the mortgage). Realistically the only option would have been for them to hang on to the house until the penalty period was up, and then sell it.

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My ex-partner and i have separated a year ago. he got a job away and is now having to meet half the payments on our house as well as renting in the area he now lives. he constantly threatens to stop his contribution to the mortgage. we have a repayment mortgage. the house has been on the market for some time and it is becoming more and more difficult to manage these payments. lots of people i know for various reasons are on interest only. i contacted my building society to see if we could switch to interest only until the house is sold. they have refused but have given no reasons why. we have at least £140,000 equity in the house and owe them £55,000 - even if the house was to sell at a dramatic loss they will get their money...... the building society will not give me a reason but are willing to loan me another £50,000 to buy my partner out - which i do not want to do. on each occasion i have broached this subject i have been sidelined into the option of borrowing more money. i am totally fed up with this. i need to eat and live and with my contribution to the mortgage this is becoming more and more difficult. we are on a massive 5.99 interest rate... for five years on top of all of this. i have learnt recently that an investment we have on part of the mortgage will incur a penalty of a considerable amount... it is too complicated! but if someone can give me an idea of why they are so dead set against it i would be glad to hear from you. they will get the money they lent to us whatever happens so why are they being so obstructive. thanks for your help.... susan thank you for your answers. the situation on the interest only has now resolved and i have been granted my request. i discovered the mortgage lender had in fact mis-sold us a fixed rate which would incur penalties they had not advised us of. on confronting them with this information, they were only too pleased to help. i got what i requested. but feel their treatment of me up until the time i had this information has been obstructive.. i now hold a few of the cards and i am deciding whether to report them to the fsa, as it is a serious oversight on their part.

Its not as simple as just "switching". You have a legally binding contract for a particular mortgage on particular terms. To allow you to change would require that contract to be terminated and replaced by a fresh agreement on new terms. IE you would need to properly remortgage. This may seem pedantic, but the lender has to protect their interest in the loan, and you have to be protected by having legal certainty. Remortgaging would incur legal charges and other fees, although the lender could waive these if it wanted to. If you went on to interest only you would also need to have something in place (an investment of some sort) that is intended to repay the mortgage capital at the end of the term. Even if your stated intention is to sell ASAP the mortgage would be for term of many years, so the investment product would need to exist as well. Unfortunately, your intention to sell may be genuine, but lenders know that minds can change, so they need to protect themselves (and you) from this. Practically speaking, you should negotiate lower payments with your lender. And if you genuinely think you will sell soon, there is not much they can do if you stop the payments. However, this is a high risk strategy, because if you can't sell you may find yourself being repossessed and your credit score may be affected.

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We bought a house last august and have been trying to sell it since december. no-one seems interested (the house is a little unusual). we cant afford the mortgage (which is one of the reasons we are selling, plus we are expecting a baby in october) and are close to defaulting on payments. we cant drop the price on the house as otherwise we will owe the bank (who are already going to charge us $7,000 as a penalty for repaying early), plus the estate agents fees, settlement fees etc mean we are already selling it at our lowest price. i am getting very depressed at being stuck in a house i really now hate, with what seems like no way out. we really need to find a solution in the next few months. has anyone any idea whether you can just hand a house back to the lender and walk away? we will already be losing $50,000 in what we have put into the house, but it will be worth it to get my sanity back. any ideas?

Take ina boarder or two to help stretch your cash until you can get in contact with a person or organisation who can provide sound financial advice.

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My home is over 194k; i refinanced, w/ the help of my best friend. the loan is now over 212k, the house has been apraised for 230k. as of 6/2008, their will be 40k of equity available. i would like for an investor/buyer to take possession of the home, continue to pay the mortgage and give me 30k, leaving them w/10k of equity. i will give them gift of deed & they can sell or rent out the home. we refinanced in 6/2006, so if the house is sold before 6/2008 than a 2% penalty will apply. i wil move out as soon as the investor agrees to my 30k and contracts are signed. i do not wish to have any further compensation. the 30k will help for relocation of myself & family & paying off debt. the real estate agent that originally sold me this home stolel 20k from me; atty fees & closing cost was put into the new loan. the mortgage is 1500 monthly, this was fine, but my hrs @ work have decreased & i before it gets critical, i would like to be out of the situation. is option possible? thank you.

Well, when was the appraisal done, as appraisals do have a shelf life. If the appraisal is more than a year old, it is not worth the paper it is written on. Your post is very complex, although you seem to have it all figured out in your mind. Investors are interested in CAP rate, how much it will make them. That a realtor stole 20k from you seems strange. Attorneys fees and closing costs are typical to be put into a loan. You can't "gift" a deed, you have issues to settle on who holds the note. And you are speculating on how much equity will be available. You have so many things going on here, and you are running on speculation of what the market will do. You should offer the property for sale and take your chances. Do a FSBO, this sounds right up your alley.

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What is the penalty if you sell your house at a price to pay off the 1st mortgage but isn't enough to pay off the 2nd mortgage (home equity line)?

You must pay off both mortgages in order to deliver the home to the buyers with clean title. You will have to come to closing with cash to cover the difference. If you cannot, you can petition your lender for a "short payoff". If you do this, you'll have tax ramifications, and it will negatively affect your credit, but it might be worth it to you.

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We are planning on buying a home, but many people have warned us that we should reconsider because there is a penalty if you sell a home in less than two years after you buy it. this is an issue for us because my dh is in the army and we may be relocated sooner than the usual 3 yrs. but we do think buying is a good investment for us because it's cheaper than renting and we would be paying ourselves instead of paying rent... - is this logical? the several people who have warned us to be careful of this also don't have any detailed info on the penalty - most think it is either a tax issue or a stipulation on the mortgage. our realtor is finding us a home with the number one feature being resale potential. he said the government may tax 3% (?) on any profit we make in the resale, but our bank says there is no fee for paying off the mortgage early. does anyone here know what this penalty is about or has anyone experienced this before? i just want to make sure we are making the right decision in buying a house (the whole point is to save or make money - not get into debt!) thanks in advance!

It's called a capital gains tax. Basically the government assumes that if you sell a house in less than two years, you only bought it to flip it and make a profit, so they tax you on the profit. Most mortgages are written without a penalty for early pay-off, but the tax is unavoidable. 3% sounds about right, too. If you are worried about being relocated in less than 2 years, don't bother buying a house, unless you want property for investment/rental use.

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Recently i was approved for a loan of 180k on a 189k house. if i live in it for over a year and sell it, do i have to pay off the entire 30 year finance charge of 280k? or am i typically only responsible for the years ecrued interest plus any prepayment penalty and taxes, fees,insurance, etc? i can't find any info on this anywhere. please only serious answers who know about home mortgage finance.

Generally, you only have to pay the interest accrued so far. There may be a prepayment penalty or other fees, which you can learn about by reading your mortgage contract.