Loans A new world
Most mortgages have this kind of penalty attached, and normally the penalty period does not pose a problem. For instance, a one year penalty period on a twenty to thirty year loan is not burdensome; the likelihood that the mortgage holders will be able to pay off the loan or will try to get mortgage refinancing within the first year is extremely low. However, if the loan is one of the few with a longer penalty period, the homeowner can effectively be prevented from getting mortgage refinancing during a period when interest rates have dropped to attractively low levels. The savings of a new mortgage with better terms may be completely offset by the fees incurred by paying off a mortgage within the penalty period. However, if the homeowner is outside the penalty period, interest rates are low, and it is possible to get a new fixed rate mortgage, mortgage refinancing is a sound financial decision.