Posted by ray@lcorn on September 09, 2003 at 17:28:49:
Mike,
This will probably get a better answer on the Legal Forum.
Also, this thread is so far down the board that few will notice it.
ray
How to avoid prepayment penalties??? - Posted by Jay (NY)
Posted by Jay (NY) on August 08, 2003 at 13:22:29:
Hi,
IM trying to buy a commercial property but the owner said that he is locked in with a 7.5 % mortgage that can not be paid off before dec. '04. and then he can pay it off but will have to pay a prepayment penalty. Do you guys know any tricks of getting out of this mortgage now?
Thanks in advance 
NO. READ what he wrote - Posted by Izzy (NY)
Posted by Izzy (NY) on August 10, 2003 at 06:16:40:
it seems the seller is “locked in” and CANNOT prepay the loan before dec. of 2004. AT THAT TIME, he can repay his loan, AND THEN only by paying a prepayment penalty.
so therefore, there is NO WAY OUT before then, unless the lender agrees (which is highly unlikely.)
I see these all the time.
Hatzlacha
Re: How to avoid prepayment penalties??? - Posted by Don Dion
Posted by Don Dion on August 09, 2003 at 11:00:49:
Have the seller check to see if the loan is assumable and also if it allows for seconds. If it is then assume the loan and get a second on the property. If seconds are not allowed assume the first and have the seller carry the remaining balance until the loan can be refinanced.
Re: How to avoid prepayment penalties??? - Posted by Robert Turner
Posted by Robert Turner on August 08, 2003 at 15:09:14:
Jay:
Its probably a conduit or securitized first mortgage. As far as I know, you can?t pay ANY of these types of mortgages off prior to the end of the lock-out period. Even then the prepayment penalties (either yield maintenance or defeasance charges) are VERY high - sometimes exceeding 30% to 40% of the principal balance immediately after the lock-out period. As a general rule, securitized mortgages don?t become economically pre-payable until late in the 8th or early 9th year of a 10 year mortgage.
Robert
Re: How to avoid prepayment penalties??? - Posted by Les
Posted by Les on August 09, 2003 at 11:33:53:
If the lender does not allow a second, there’s significant equity in the property, and the seller doesn’t want to hold more than 20-25% then mezzanine financing may be able to close the gap.
Drop me a line to setup discussion.
Re: How to avoid prepayment penalties??? - Posted by Mike Coan
Posted by Mike Coan on September 09, 2003 at 13:38:00:
Got a lender based in Texas, I signed a loan i 1999 which had a 5 year pre-pay, now I’m wanting to refi, I understand pre-pays are not legal in California (state in which the property’s in and I signed docs in California), for over 3 years, Saxon is trying to get a $15,000 penalty out of me now on a refi? Question- can I get them to drop the pre-pay because of the law change in California??
Mike Coan
Re: How to avoid prepayment penalties??? - Posted by Don Dion
Posted by Don Dion on August 09, 2003 at 11:36:47:
What state is it in?
If the seller wont hold the full second then just take off the top of the sales price the cost of the prepayment penalty to his lender and fund the purchase. What kind of property is it? What is the sales price and how much are you planning on putting down?
Re: How to avoid prepayment penalties??? - Posted by Mike Coan
Posted by Mike Coan on September 09, 2003 at 13:36:58:
Got a lender based in Texas, I signed a loan i 1999 which had a 5 year pre-pay, now I’m wanting to refi, I understand pre-pays are not legal in California (state in which the property’s in and I signed docs in California), for over 3 years, Saxon is trying to get a $15,000 penalty out of me now on a refi? Question- can I get them to drop the pre-pay because of the law change in California??
Mike Coan