Prepayment Penalty Clause on Home Equity Loan

[newstart90]

What is the name of your state? MN

We were looking for a quick and easy home equity loan of about $20,000 for home improvements to sell our home. We would only need the loan for about 6 months, max.
We called the " Oh, No...lost another loan to ****** " people, and the approval process seemed a little too easy to me. No appraisal needed? Hmmm.
Anyway, the loan was granted ( we haven't signed) for 30 years (!), and there is "no prepayment penalty", no "minimum finance charge", but we will NOT "be entitled to a refund of part of the finance charge"
The finance charge is $23,000 on a $20,000 loan, making a total of $43,000.
If we should be foolish enough to go ahead with the loan, and wanted to pay it off on 6 months, would we still have to pay the entire $43,000?
Pardon my ignorance....but we don't wanna lose a huge chunk of equity...

 

[Veronica1228]

What is the name of your state? MN

We were looking for a quick and easy home equity loan of about $20,000 for home improvements to sell our home. We would only need the loan for about 6 months, max.
We called the " Oh, No...lost another loan to ****** " people, and the approval process seemed a little too easy to me. No appraisal needed? Hmmm.
Anyway, the loan was granted ( we haven't signed) for 30 years (!), and there is "no prepayment penalty", no "minimum finance charge", but we will NOT "be entitled to a refund of part of the finance charge"
The finance charge is $23,000 on a $20,000 loan, making a total of $43,000.
If we should be foolish enough to go ahead with the loan, and wanted to pay it off on 6 months, would we still have to pay the entire $43,000?
Pardon my ignorance....but we don't wanna lose a huge chunk of equity...

The finance charge is a calculation of what you will have paid in interest after the 30 years are up. It's based on amortization calculations and how they determine your monthy payments. If you pay off the loan in 6 months, you will only have to pay simple interest for the outstanding balance up until that point.

The full amount is quoted in the contract because full disclosure is required for HELs and HELOCs.

 

[florida5121]

Me I'd stay far away from the TV commercial company and look to your local banks. Many of them will offer no closing cost HELOC's. Make sure to check on pre-payment penalities. I know in my state most local banks offer no closing cost seconds and if there is a prepay penality it is just the recapture of the closing costs, say around $500.00. Best advise I can give you is to stay local and don't get sucked in by those TV commercials.

 

[MORTGAGEman]

I agree with Florida, be sure to shop around for the best scenario, I got a great deal with a big bank on their home equity line of credit, there are no closing costs unless I close my line of credit before the three years. then they just charge me the closing costs and everything is good to go.

I know with the Mortgage company that I work at they charge you a few upfront closing costs and then if you close the line of credit before the three years are up they charge you an additional $500 prepayment penalty.

It's really not a bad deal!