I would recommend reading your loan docs. Look for terms like "early payoff penalty" and the like.
As a conventional loan officer, I am highly discouraged from originating loans if I suspect it will be paid off in a very short amount of time. In fact, if a loan is paid off or goes delinquent within the first six months after closing, they charge me a fine against what they paid me in the first place.
I won't say it's impossible, but it's bad practice.
@DeWitt Gibson this isn’t related to the original post but you just basically confirmed what I’d heard too regarding the fine if it’s paid off to soon.
So my question is what’s the minimum amount of time a bank needs a loan to be kept for them to make their needed profit margin? If I take out a 100k 30 year fixed loan but only have it for say 5 years does that still give the bank their needed profit etc?
Well your broker will hate you because they will lose their commission.
Thank you guys for the knowledge..
I won’t do it if it hurts my loan officer or my broker/realtor .
I have really good people working with me and I wouldn’t want to lose them.
So I will have to fund it with either private money or hard money lender in this case.
Appreciate the knowledge you guys are sharing and I m learning so much.
Thank you all.
@Brad Tom you have a good point too.
Business is business.
I ll think about it. Thankyou
Just to be clear, we are talking about conventional mortgage loans. Hard money / private money may be designed for short term financing.
The actual break-even depends on a lot of factors. Whether the loan origination fee is paid by the buyer or lender, what type of loan it is, whether it is resold or keep on the books, the amortization schedule, etc.
All I can say is that the standard with my employer is six months. If the loan is paid off or goes delinquent before six months, they come back after me for originating a bad loan.
Conventional loans are really designed for long term buy and hold. SO, if I were originating a conventional mortgage for you I would really try and make sure that you intend to hold the property for at least six months. I would say that at least a year is a better benchmark. These loans do go on your credit report and so the next time you apply for one the underwriter will review your credit, if they see a pattern of short term loan payoffs they may not be excited about underwriting another loan.
Again this is a conventional mortgage I am talking about, not hard / private money. Go to town on hard / private money :)