As a Mortgage Broker in Palm Beach Gardens, (Northern Palm Beach County) Florida part of my job is to order appraisals for my clients who wish to refinance their property. With the amount of Short Sales and Foreclosures that are in the area many of my clients believe it really does not effect them unless they have plans on selling their home. Think Again!
Roughly eight months ago one of my clients came to me to refinance out of their current mortgage and into a lower rate. At the time they still had a Pre-Pay Penalty of $9,000 which they would have to pay in the event they would sell or refinance the property. They planned on staying in the home for long term. At that time, the home appraised out where they had over $80,000 in equity in their home. The clients decided that they would wait the eight months until the Pre-Pay was over. I believe most people would have done the same thing at that time.
Now eight months later with all the Short Sales and Foreclosures that are going on in South Florida they have lost that $80,000 in equity and now owe what the house is worth. (100% Financing) Their ARM is now due and they are facing an adjustment next month. This is a big problem in the industry with ARMS adjusting and the homes loosing equity. Especially if you need a loan that would require outside of the norm. (Stated, No Doc, etc...) In This case, if they would have chosen to pay the penalty they would be in a much better program now with a lower rate and more of a long term goal. (which is what they wanted)
My suggestion is if you are in a solid equity situation and have a Pre-Payment Penalty still enforced you may want to consult your Full-Time Mortgage Professional. As I have always said either pay now or pay later but you will have to pay. However, in this market being proactive may help you. Don't wait until your ARM Adjusts and then complain that you can't do anything.
Remember it is your Money.
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