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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I refinanced my home in june. there is a 3-year prepayment penalty equal to 6 months interest (roughly $9000). the home is valued at the same price as the loan. i'm paying $1800 a month on a $270k loan. should i sell my home now to get rid of the debt or wait until the 3 years is up so that i don't have to pay the prepayment penalty? my wife and i have separated so there is no reason to keep the house.

You don't say where the house is. Some believe that there is a housing bubble in certain areas. If you are in one of those places, then you may want to get out before the bubble bursts. If not, it might be better to hold onto it for awhile. Another possibility is to rent out the house. If you did that, you would have to declare the rent as income, but you would be able to deduct all the interest on the house. You can also amortize the value of the house, taking another tax deduction from that. In addition, any costs associated with upkeep or marketing the house are deductible -- as are taxes or association fees. You may actually be ahead of the game even if you can't rent it for the full $1800. If you aren't in an area with a housing bubble, the value could appreciate while you hold onto it.

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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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We have a home that its rent is about half of the mortgage. my husband wants to get a loan with 3 year pre-pay penalty and take out some money as well. this way he wants to lower our monthly payments but at the same time, get the equity as cash. in 3 to 5 years if the housing market is still bad, he wants to let go of the loan and foreclose, and if the market is good, then he wants to sell. we are a little squeezed for money now and i think he is not thinking rashionally. is this a good thing?? we have a great rate of 6% fixed now on the house, but we got a second mortgage on it that is making our payments a little high. what are the consequences of getting such a loan and should we just try and pay the high mortgage. who knows what's going to happen with home prices? this is a house worth 1.2 mil and we owe about 950 thous on it. help me.

Home price is dropping right now and will continue to drop the next few years. Good luck with your cash out refi., your house isn't worth 1.2 mil.

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I wonder if the mortgage company can charge you a prepayment penalty if you foreclosure. the paperwork says if yu refinance or sell the house....nothing about foreclosure.

If you sell the house to avoid foreclosure, the prepayment penalty will be charged. However, you may be able to negotiate with the lender if the property is over financed and you have a willing and able buyer. Ask the buyer to write a contract and for submission to the lender for approval of a "short sale." If you are unfamiliar with these ideas, you will need the assistance of an experienced realtor or investor. Hope it works out.

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My mom purchased a home in n.j. for about $80,000 10 years ago.since then she has refinaced it with a home equity loan and currently owes $69,000 left on that loan.she wants to sell the home to me for whats left on the loan as a cash out refinance loan which would put the house in my name. the question is or questions are is there any type of gift penalty to me since the actual market price of the house is $180,000,and how might the irs view this if at all, as a capital loss(since its being sold for less the it was originaly paid for) or as something else since it could be sold for more. any thoughts or advice is this would be greatly appreciated.

Tax consequences of you buying the house: 1. Your basis in the house is your mother's basis of $80K. If you sold the house for $180K, you would owe taxes on $100K unless you lived in the house as your main home for two years. If you eventually sell the house and it has appreciated more, you could owe tax on the sale even with the exclusion of $250K for unmarried taxpayers ($500K for married). 2. Your mother will have given you a gift of $101K. This reduces her lifetime gift exclusion of $675K. If she has other assets, this may impact her ability to give more of her assets without paying gift tax. 3. Since your mother is selling the house for less than she paid for it, she does not have a gain. Her loss on the sale is not deductible.

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Hello my husband and i need help. two years ago we bought a home for $227,000. we put no money down and financed the whole amount. we have two mortgages and we have something called a 80/20 loan. we have a pre-penalty if we sold our house before may 31, 2007. between our two mortgage payments we pay around $2,300 a month just for our mortages. my parents help us because we can't afford it. i am not working right now and have just filed for a chaper 7 bankruptcy. so things don't look good. this may we have to make a decision whether to refinance this house or sell and get something smaller. we are unsure what do. we need our mortage payment to be around $1,000 a month to afford. does anyone know where we could go for help? should we start with a relator or a new mortgage company? do we have to wait to may because of our pre-pepenalty? where do we start? what questions should i ask to a mortage company? please help. thank you

Your mortgage payment is wayt above what you can pay for a home, so you should sell the house. You need to know up front though, that by filing for a BK, you have just put yourself into a higher risk category for lenders - which would mean higher interest rates and probably not a 100% loan, right away. If you filed the BK by yourself (without the husband) that is going to help him to get a mortgage by himself - he is the one working anyways, and you can always be added to the title even if not on the mortgage. You don't need to necessarily wait until May to sell. Some Prepayment penalties are "hard" and some are "soft". Soft means that if you sell rather than refinance, the penalty may be waived - check your paperwork from the closing. If it is "hard", then waiting until it expires usually is the best option, but you can start selling before May, just not close on the escrow until after the PPP ends in that case. You should definately start with a mortgage professional, this will give you an idea of how you'll need to structure a new home loan and what exactly you will likely be able to afford. Then, take that info to a Realtor who can assist in both selling your home, and in buying a new one. For the double transaction, you may be able to negotiate a smaller fee for the sale of your home - say 5% rather than 6%, but this would depend on state, specific market, and company that you find. Best of luck. If you need some general info please feel free to use my website at www.fnmshome.com

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House has both husband and wife on deed. husband has mortgage solely in his name and credit. few months ago husband refinanced house for a larger amount to pay down debts. wife then moved out of the house into an apartment of her own and filed for a divorce. wife doesn't have income or creditworthiness to refinance or pay for house. husband wants to remain living in home and continue to pay mortgage. house appraisal value is the same dollar amount as the loan/mortgage amount. wife wants her share of equity out of the house. does she have any "leg to stand on" so to speak and what could one reasonably expect her to "get" out of this house? how does a judge divide equity in a house that doesn't have any? buy out doesn't seem an option because loan is already soley in husband's name. husband doesn't want to sell property. there is a pre-payoff penalty on mortgage. is wife responsible for half of this penalty? how someone thinks the wife who left, no longer lived in the home, no longer payed for it, did not contribute to the maintenance or upkeep to the home nor it’s appreciation in the years following the divorce but thinks the wife should get 50% of the future sale value

My ex husband did the same thing and I fell for it! It is a common ploy to make sure wife gets nothing. It *seems* logical, doesn't it? There is nothing for her to get so she doesn't push for anything. Yes. she has a "leg to stand on." She needs a *good* attorney. At a *minimum*, she should ask for 50% of the future sale of the property. (Are you *sure* she is still on the deed? Or, did he trick her into signing off the deed when he re-mortgaged?) Also, she can ask for a settlement or payments. The wife *should* get her share of the equity of the house and it is most likely that the judge will support this request. Just because the husband doesn't have the money doesn't mean he doesn't owe her the money! Get a *good* attorney! ADDED: You don't get it. She could ask that she get the house and *you* keep paying for it! And, if she has *any* good reason for leaving to bring before the judge (Like physical abuse, financial irresponsibility, emotional distancing, etc.) she would get it! So... 50% of future equity is *better* for you than her getting *100%* of future equity! Right? Not so crazy!

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If i sell it now and hold the mortage will i have to pay the short term capital gains rate every year on the payments and when it is refinanced by the buyer (i put a 3 yr refi penalty but expect they will refi sometime after that). also as i earn the income from the loan could i pay the capital gains and maintain the full level of my investment (

If the home has not been your principle residence for 2 of the last 5 years, when you sell you could be subject to capital gains. That law could change before you sell, but I think you will still be subject to capital gains because it will be looked at as investment property. I am not a tax advisor, just going by what I have read.

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I bought my house in 2007 with an fha loan. i believe the terms of the loan state that the house must be my primary residence for 5 years before selling it or refinancing. i would like to buy a condo and relocate to new york in the next 3 years. i'm saving money to do that and working on other aspects of planning (job, etc). i want to rent out my house, but due to the stipulations of the fha loan, i can't just go renting it out all willy nilly without getting in trouble (with the irs or with the state that gave me the money). is it wise to refinance the loan from an fha loan to a conventional loan and then rent it out? i did some research on this, and it seems that my pmi should be paid in full within the 5 year period, but i may get charged for the refinancing, and possibly a penalty from fha. or should i just sell the house, buy another one with a conventional loan and rent that one out instead? either way, i'm considering having two properties, a primary residence in nyc and a rental property in my current state. thanks for the help! are the terms the same for a cda loan?

Unless you have an FHA loan insured by Bond money, you only have to live in it for one year before it can become investment property. Unless you put a lot of money down or are paying extra, the mortgage insurance will not be paid in full in 5 years with the FHA loan. Your LTV has to get down to 78% for it to drop off. Five years is the minimum amount of time you must keep MIP on an FHA loan. If you refi to a Conventional loan you must live in it for one year as your primary residence. It is much cheaper to refi as a primary residence than investment property. There should be no penalty for refinancing from an FHA loan. Just plan the closing so the payoff is received by the 1st day of the month or you will have to pay a full month's worth of interest. There are lots of headaches with rental property, especially if you are out of town. I would sell & use the equity as a downpayment.

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I want to sell my current home & purchase a condo. i am a retired senior with a fully paid-up home. the condo is in construction to be finished in a couple of months. if i list my current home, it may not sell in time to simply pay for the condo. therefore i have been to see lenders. they all recommend against a bridge loan due to unavailability and also due to high costs. they also recommend against a home equity loan. the one i think would be the best is this scenario but i am asking for your guidance on which one is the better way to do this for any and all reasons. re-finance my current home and take a $100k loan at less than 5%. this loan would have no prepayment penalty. i would make a $50k down payment on the condo then sell my home and pay off the refinance loan on the home & owning the condo free & clear. the other alternative, is to take a mortgage on the new condo & pay it off when the house sells but that mortgage cannot be done until it is completed. again, there would be no prepayment penalty. also the seller will not do a contingency. if i would take the loan on my current home i would not have a problem making the mortgage payments because they would be low enough for me to afford to do this for a few months while the house is listed. but i'm not sure if it makes things more complicated to sell a home with a mortgage on it or not? i would like to keep the home & rent to my son for property taxes only but it would be less rent than fmv & i think the irs calls it my second home & the tax benefit is lost. what a shame not to be able to help out. thank you,

Hello Leeway, Seems the drop dead simplest solution is to get a mortgage on the new home. If construction has already started, then that seems to imply you have already given them a deposit, so why would you need a bridge loan with only 2 months remaining til completion - a "couple" means (2) to me? People generally get bridge loans at the beginning of the process so construction can get started. On the thought of refinancing your current home and then paying it off in a few months, lenders expect that when you refinance your home, you will remain in the home for at least 12 months and would not like the thought of you selling the home after making just a few payments on the loan. The lender could suffer chargebacks for that. Think about this. By refinancing your current home at the low rates for a primary residence, you are indirectly getting a bridge loan to buy your condo - but at a rate you would not otherwise obtain for a true bridge loan. But by telling the lender that you intend to occupy that home for the next 12 months, you would be committing mortgage fraud. I can't see why someone recommended against a home equity loan. I've had many clients get home eq loans to buy other property. Better yet, get a home equity line of credit. You'll get a really low start rate. Then pay it off after the home is sold. Be aware there may a fee involved to close out a home eq line of credit that soon. Be sure to get all the details. But more than likely, the fee for the early close-out will be less than the closing costs on a refinance - and no fraud would be involved. For the record, selling a home with a mortgage is par for the course. Most people who sell their homes have a mortgage outstanding. You should seek competent tax advice on the second home and rental issue. Good luck.