We all know many home mortgages are ticking time bombs and ARM loans with adjustable interest rates that are about to explode. Still, there's another potential disaster waiting in many of those mortgages, one that doesn't even surface until the home is sold or refinanced.
When a home in the East Bay was recently put on the market, it bucked all trends and sold in no time.
" You just managed to sell a home in a tough market, huh?" asked ABC7's Michael Finney.
"Yea, we put it on the market and within three days we had an offer," said Darin Michels, a homeowner.
Sounds like a dream, but there was a hitch, a $6,600 hitch.
The problem came up after the deal was made to sell the home, but had been percolating for nearly half a decade.
"We lived there for seven years and refinanced about five years ago through a broker and got a loan that had a prepayment penalty of five years on it," said Darin.
There was a "prepayment rider to note" which stated if they keep the loan for less than five years the homeowner would have to pay an extra six months interest.
"A prepayment penalty is a fee that a consumer pays the lender for getting the loan at either a reduced rate or just getting the loan if they don't quite qualify," said Serena Kokjer Greening, a certified mortgage planner. "Some people don't know they have a prepay penalty even though they made the choice when they got the loan."
Darin's case is especially hard to take because he sold his home and was paying off the mortgage just 18 days shy of five years. Still the mortgage company said, pay up.
"Are you surprised?" asked ABC7's Michael Finney.
"No. I've never seen anybody be excused from a prepayment penalty," said Greening.
Well, you have now.
"I got in contact with Seven On Your Side and that's when it got done. Twenty hours later it was resolved," said Darin.
The mortgage holder, Chase, let the prepayment penalty slide. It didn't have to do that.
"I don't know how you do it, but you got it done," said Darin.
