Taking The Penalty
Josh is afraid to pay his second mortgage off early, because of the loan prepayment penalty that goes with it.
QUESTION: Josh still has a second mortgage to pay off, but there’s a loan prepayment penalty to pay it off early. They owe $23,000 on it and make $60,000 a year.
ANSWER: If there is a penalty for prepayment, but not one for partial prepayment, then you can pay extra until you get the balance low and then write a check to pay it off. Usually a prepayment fee is associated with a subprime loan. Call them and say you want the penalty fee waved, and if they do, you’ll pay it off because they need the capital. Put pressure on them; don’t call them once, but 10 times. In the meantime, pay extra payments and get the balance down. If you have a penalty at that point, just pay it off.