Soft and Hard Prepay
“I’ve heard the terms ‘soft prepay’ and ‘hard prepay’. What do they mean?”
***ANSWER:
As you may know, “prepay” refers to a prepayment penalty that is charged when a home loan is paid off early. Most home loans don’t have prepayment penalties, but some do. For those that do, the penalties are usually for the first 1-5 years. And they’re typically 80% of 6 month’s interest.
SOFT: Refi-Yes, Sell-No
A “Soft” prepayment penalty is one that is charged if you refinance, but NOT if you sell:
HARD: Refi-Yes, Sell-Yes
A “Hard” prepayment penalty is due in both cases
By the way, read your “Note” or “Trust Deed Note” (not the same as the “Trust Deed”) thoroughly to be sure you do not have a prepayment penalty, often referred to as a “prepayment privilege”.
Buying or Selling San Diego Investment Property