Mortgage Do's And Don'ts
Mortgages can be tricky, and it's easy to make mistakes that can end up costing you dearly. That's why we've put together this list of Mortgage Do's and Do not's to help you navigate the process with ease - and a little bit of humor.
DO: Shop around for the best mortgage rates
DON'T: Assume your bank will give you the best rate just because you have a checking account there. Remember, loyalty is a two-way street.
DO: Have a budget in mind
DON'T: Get in over your head. Just because you can technically afford a million-dollar mansion doesn't mean you should buy one. You don't want to be house-poor and unable to afford groceries.
DO: Get pre-approved before house-hunting
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DON'T: Assume you'll be approved for a mortgage just because you have good credit. Pre-approval is important because it gives you a better idea of how much house you can afford and shows sellers that you're serious.
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DO: Consider your future plans
.
DON'T: Assume you'll live in your new house forever. Life happens, and you may need to sell sooner than you think. Make sure you're not getting into a mortgage that you can't realistically afford if you need to move in a few years.
DO: Get pre-approved before house-hunting
.
DON'T: Assume you'll be approved for a mortgage just because you have good credit. Pre-approval is important because it gives you a better idea of how much house you can afford and shows sellers that you're serious.
.
DO: Consider your future plans
.
DON'T: Assume you'll live in your new house forever. Life happens, and you may need to sell sooner than you think. Make sure you're not getting into a mortgage that you can't realistically afford if you need to move in a few years.
DO: Read the fine print
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DON'T: Sign on the dotted line without reading the terms and conditions. There may be hidden fees or clauses that could come back to haunt you later.
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DO: Be prepared for unexpected expenses
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DON'T: Assume everything will go smoothly. There may be unforeseen expenses, like a leaky roof or a broken furnace, that can quickly drain your savings. Be sure to budget for these types of surprises.
DO: Read the fine print
.
DON'T: Sign on the dotted line without reading the terms and conditions. There may be hidden fees or clauses that could come back to haunt you later.
.
DO: Be prepared for unexpected expenses
.
DON'T: Assume everything will go smoothly. There may be unforeseen expenses, like a leaky roof or a broken furnace, that can quickly drain your savings. Be sure to budget for these types of surprises.
DO: Have a good sense of humor
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DON'T: Take everything too seriously. Yes, buying a house and getting a mortgage can be stressful, but try to find the humor in the situation. After all, laughter is the best medicine for a stressful day.
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By following these Mortgage Do's and Do not's, you'll be well on your way to successfully navigating the mortgage process - with a smile on your face. Good luck, and happy house hunting!
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💰 Prepayment Penalties, Yield Maintenance & Defeasance Explained 📊
💰 Prepayment Penalties, Yield Maintenance & Defeasance Explained 📊
🏦 Avoid Costly Surprises: Prepayment Penalties, Yield Maintenance & Defeasance 💡
💰 Understanding Prepayment Penalties, Yield Maintenance & Defeasance
When securing a commercial mortgage, most borrowers focus on interest rates, loan terms, and closing costs — but there’s another critical detail that can significantly impact your bottom line: prepayment penalties. These fees are designed to protect lenders from lost interest income when loans are paid off early. The two most common forms in commercial real estate finance are Yield Maintenance and Defeasance.
In this post, we’ll break down what these terms mean, how they work, and how to prepare so you don’t get caught off guard.
What is a Prepayment Penalty?
A prepayment penalty is a fee a lender charges if you pay off your loan before the agreed maturity date. While residential loans sometimes have small or no prepayment penalties, commercial loans — especially those tied to securitized products like CMBS loans — often have substantial ones.
Yield Maintenance
Yield Maintenance ensures the lender receives the same yield they would have earned had you not paid off the loan early. Essentially, you pay a lump sum that covers the difference between your loan’s interest rate and current market rates for the remaining term.
· Pros: May be more predictable than defeasance in certain interest rate environments.
· Cons: Can be very expensive if market rates have dropped since you originated the loan.
Defeasance
Defeasance replaces the collateral for your loan (usually your property) with a portfolio of government securities that replicate the cash flows of your loan’s remaining payments.
· Pros: Can free the property from the mortgage lien, allowing you to sell or refinance.
· Cons: Complex process with high transaction costs and the need for specialized professionals.
How to Plan Ahead
1. Review your loan documents early — Know your exact prepayment structure before signing.
2. Model multiple exit scenarios — Understand your penalty exposure if you sell or refinance before maturity.
3. Work with an experienced mortgage broker — A broker can negotiate better terms upfront and help minimize penalty impact.
Key Takeaway
Prepayment penalties, yield maintenance, and defeasance are not “fine print” items — they’re critical loan terms that can cost hundreds of thousands of dollars if misunderstood. By understanding these clauses before you sign, you protect your flexibility and profitability.
💡 Pro Tip: At Medallion Mortgage, we guide clients through the fine print to ensure your financing strategy fits your long-term investment goals. Contact us before you refinance or sell to see if we can help you structure a better outcome.
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