June 24, 2005 WASHINGTON -- Most
borrowers become aware quickly when seeking home financing about the role credit
rating plays in getting the lowest interest rate and
APR. Many do not know, however, that
prepayment penalty fees also have bearing on the homeowner's locked
rate.
An analytic report by Sirote and Permutt PC, a Birmingham
Alabama-based law firm, came at the request of the
National Home Equity Mortgage Association
for various purposes. Results of the firm's research were compiled based-upon
analysis of close to one million mortgages transacted by 250
non-prime home finance lenders throughout 2004.
Notable was the fact that the study showed that borrowers who
agree to prepayment fees for specific loan programs actually wind-up paying less
for their mortgage. It was revealed that
interest rates for home
loans which include prepayment penalties were 38 percent lower, on average, than
mortgages without similar clauses written-in.
The analysis notated the fact that borrowers carrying
lower FICO scores (credit rate) were less apt to agree to a
pre-payment penalty when compared to borrowers with an excellent FICO credit
score. Furthermore, those with higher credit ratings agreed to prepayment
clauses largely because they were able to secure a lower-base rate for their
mortgage to begin-with. - Article by
Ben Pengreen for CMR Original
News.
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