Consumers Helping Consumers

Closing Table Pressure, Previously Undisclosed Penalty
C. L., Computer Consultant in Las Vegas Nevada

My wife and I purchased a home in a new development in Las Vegas. We viewed the model home and were impressed with the development and the home itself. The real estate agent asked us if we had a mortgage broker or lender in mind. We had not discussed loan needs with anyone. The agent suggested a mortgage broker that she had worked with several times. We decided to meet with her recommendation. We didn't know anyone else in the mortgage business.

We met with the recommended mortgage broker. She understood the new housing development well. That seemed to make things easier for us. We agreed to the interest rate she found for us. It seemed comparable to the interest rates our friends had on their loans. That made us comfortable.

When we signed the final documents for our home, we learned of a prepayment penalty. I wasn't sure exactly what that meant at the time. The mortgage broker told us that a prepayment penalty only mattered if interest rates dropped by a lot. Then, it only mattered if we refinanced and got a new loan. I asked if interest rates were going to drop and she said she couldn't be sure, but that our rate was very low already. So, we had a loan with a prepayment penalty that we never knew about beforehand.

Since then, my wife and I found that interest rates have dropped by a very large amount. We talked to another mortgage broker about our loan, and he explained that although interest rates were much lower, the prepayment penalty was so high that it didn't make sense for us to refinance. He said that we would end up paying much more than our savings. When my wife and I look back, we think that we were pressured into accepting the prepayment penalty at the time we signed for our new home. We think we are paying too high an interest rate now. It is costing us a lot of money.

Equal Home Finance Bureau Comment: Again, surprise prepayment penalties at the closing table have been running rampant lately. No mortgage broker has any idea if interest rates are going up or down. If the mortgage broker really knew, she wouldn't be a mortgage broker, she'd be working on Wall Street trading bonds for millions of dollars per year.

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