If you're considering an Investor Flex loan for your next property purchase or refinance, it's important to understand how prepayment penalties work. These penalties can affect your bottom line if you plan to pay off your loan early—whether by refinancing, selling the property, or simply making a large lump-sum payment.
Let’s break down the three prepayment penalty options currently offered under the Investor Flex program and look at a few real-life examples.
🔹 Option 1: 3-Year (3/2/1) Prepayment Penalty
This structure applies a declining penalty over the first three years of the loan:
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Year 1: 3% of the remaining loan amount
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Year 2: 2% of the remaining loan amount
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Year 3: 1% of the remaining loan amount
💡 Example: If you pay off a $100,000 loan during the first year, the penalty would be $3,000.
🔹 Option 2: 2-Year (2/1) Prepayment Penalty
This shorter option includes:
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Year 1: 2% of the remaining loan amount
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Year 2: 1% of the remaining loan amount
💡 Example: If you pay off a $75,000 loan during the second year, the penalty would be $750.
🔹 Option 3: 1-Year (1/1) Prepayment Penalty
This is the most flexible option with only a one-year commitment:
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Year 1: 1% of the remaining loan amount
💡 Example: If you pay off a $55,000 loan during the first year, the penalty would be $550.
⚖️ Important Note
Prepayment penalties are not allowed in every state and are subject to state-specific regulations. Always consult with your mortgage professional or legal advisor to determine whether a prepayment penalty applies to your loan in your location.