When you first apply for a mortgage, you might not give too much consideration to the prepayment penalty – but you probably should. If at any point in the future you decide to refinance early for reasons including taking advantage of a lower interest rate or selling your home, it’s important to understand how much you would have to dish out if you are ever slapped with this penalty, as well as when such a payment would need to be made and what circumstances warrant such payment.

What Exactly is a Prepayment Penalty?

Basically, a prepayment penalty on a home loan requires you to pay an extra fee if you decide to pay off your mortgage early. However, it’s important to define what exactly “early” is considered to be, which will be spelled out in detail in your mortgage documents. 

The prepayment penalty is already a part of your mortgage package. It will be stipulated on the mortgage along with its associated interest rate, and terms and conditions in the loan documents. Lenders are not permitted to add it after the fact without your written permission.

Depending on your exact home loan, you could be faced with a prepayment penalty if you sell our home or refinance your mortgage before a certain date has come and gone, which is usually two or three years after the mortgage initially takes effect. However, some home loans set this time period to as much as 10 years. Not only that, some prepayment penalties might be required to be paid only in cases of an early refinance, and not with the early sale of a home.

Generally speaking, the prepayment penalty is either expressed as a percentage of the mortgage principal balance or a specific number of months interest. However these fees are calculated, they are usually pretty hefty, which is why you need to crunch the numbers very carefully before deciding if a refinance is financially worth it.

Do the Math Before Refinancing

Sometimes the fine paid is a lot less than the money you can potentially save with a lower interest rate on a new mortgage. On the other hand, the penalty could very well be a lot more than what you would potentially save with a lower rate. That’s why it’s important to do the math before making this decision.

For instance, if you pay a $5,000 prepayment penalty right now to break your mortgage, but save $75,000 over 20 years by refinancing, it would be well worth it. This is especially true if you are planning on staying in your home for the long haul and are not planning another move any time in the near future.

On the other hand, a $5,000 prepayment penalty would not be worth it if you’re planning on moving in a couple of years before you’re able to take advantage of the full savings potential of refinancing your mortgage.

Can You Get Away Without Paying a Prepayment Penalty?

If you want to refinance your mortgage before the penalty time period expires, there’s little you can do to avoid a penalty. If it’s in the contract that you signed, you’re bound to it, as well as all other stipulations on the document. That’s why it’s imperative that you go through the documents very carefully before signing at the very beginning.

As such, there aren’t really many options when it comes to avoiding an existing prepayment penalty. Your best bet is to wait for the penalty to expire and to identify when your prepayment penalty is going to expire.

You could also see if your current lender will allow you to dodge the prepayment penalty of you refinance with them; however, this is not a sure shot. Not only that, the lender will likely require a prepayment penalty on your new mortgage too.

The Bottom Line

Prepayment penalties aren’t exactly an attractive component of a mortgage package. Depending on the situation, it might not make mathematical sense to refinance early if the penalty won’t be recouped at some point. Having said that, this penalty fee could be worth it in the end if your calculations show significant savings over the course of your mortgage. Make sure to crunch the numbers, and work with a seasoned mortgage specialist who can help you figure out the best path to take.

Located at 1131 North State Street, Bistrot Zinc, has become one of my change of weather favorites in Streeterville. According to their website, “Bistrot Zinc is an authentic French bistrot, serving classic “neighborhood” French food. The name is derived from typical French bistrots where the “zinc” bar is a popular meeting place for good food, conversation and camaraderie.” The zinc in the name comes from the handcrafted zinc bar.

The food is a combination of contemporary and classic French cuisine. One of my favorites on the menu is the French Onion Soup, which is topped with gruyere cheese (I cannot say enough about this soup).  Here are some other favorites that consistently bring gastronomic pleasures – Escargot BZ, Croque Monsieur, and Steak Frites. All of these are foods are simply amazing and what you would expect from such a local favorite.

It’s interesting to note that when you look on Yelp and Open Table you’ll see that the service is hit or miss. In my experience, every time that I have been into Bistrot Zinc I have had great service. The staff have been cordial, know the food, know the wine list, and make recommendations that pair so well with what you are having that day.

The price for food ranges from $11-30 per person without drinks. It’s suggested that you make reservations for evenings and brunch as the space, while cozy, does fill up pretty quickly.

CATHY MALLERS & DEAN’S TEAM CHICAGO

5 Things to Do Right Now to Get Ready to Buy in 2017

Thinking about buying a home in the new year? It’s never too early to start preparing for the big purchase to ensure you’re on solid ground. While finding yourself a seasoned and trustworthy real estate agent is a critical step in the game, there are a number of things you should be doing even before that to make sure you’re adequately prepared to buy.

If you plan on purchasing a home in 2017, here are a few steps you need to take to make the journey to homeownership a financially sound one. 

1. Check Your Credit Score

Unless you’re blessed to be able to pay all-cash for your home purchase, you will have to finance it with the help of a mortgage. But before your lender extends a home loan, your credit score will be looked at first. This little number plays a big role in determining whether or not you’re able to qualify for a mortgage. If it’s too low, you stand a good chance of being denied.

Generally speaking, a credit score of 680 and over increases your chances of getting approved, and anything over 740 will ensure a lower interest rate. After pulling our credit report, have a look at what your score is. Look for any errors on the report that are pulling your score down, and if you notice any discrepancies, have the agency investigate the issue. Rectifying any errors can add some much-needed points to your overall score.

If your score is less-than-perfect, take steps to improve it. Start paying all of your bills on time and in full, make changes to any bad spending habits, and get your credit limit raised. Small steps like these that are done well in advance of applying for a mortgage can help you increase the odds of getting approved, and can help you secure a lower interest rate that can save you thousands of dollars at the end of the mortgage term. 

2. Don’t Take Out Additional Loans or Credit

Once you take out additional credit cards or loans, your credit score will be affected. By opening another credit card account or taking out a loan (such as a car loan), you’ve created another line of credit and added to your debt. This can alter the application numbers and put your application in peril. Don’t make it more difficult for you to get approved for a mortgage with an attractive interest rate and favorable terms and conditions by adding more debt to the books. 

3. Start Saving Up For a Down Payment

Not only will your credit score be heavily weighed upon when determining whether or not you are eligible for a mortgage, the amount of liquid cash you have to put towards a down payment is also critical. Having at least a 20% down payment is ideal as it will help you avoid the added cost of Private Mortgage Insurance (PMI). However, coming up with that large of a lump sum is challenging for many homebuyers, especially considering the high cost of housing in many parts of California.

Nevertheless, at least 5% should be saved up to be put towards a down payment. Not only is this a requirement for conventional mortgage approval, more money put towards a down payment will reduce the mortgage amount and thereby lower your monthly payments. Of course, there are government-backed programs aside from conventional mortgages that allow you to put less than 5% down, but obviously the more you can put towards the overall mortgage, the better. The sooner you start saving for this expense, the more time you’ll have to build the pot.

4. Get Pre-Approved For a Mortgage

How will you know how much you can afford when it comes time to buy? How will you even know how much of a mortgage you will be able to get approved for? The only way to know the answer to these two questions is to approach a lender and get pre-approved for a mortgage. Your lender will ask you to submit a few documents that will be looked over to determine whether or not you can get approved for a mortgage, and if so, for how much. Typical pieces of information that your lender will ask for include your tax return, paycheque stubs, letter of employment, W-2 forms, and a list of your debts and assets.

5. Start Browsing

You already know roughly how much you can afford thanks to your mortgage pre-approval, so now you can start focusing on the neighborhoods where the homes for sale match your budget. Having that dollar figure in mind will help you eliminate the areas that are out of your range and help you narrow down the communities that your finances can comfortably cover.

Not only should the neighborhood be within your financial comfort zone, it should also be a place that you can see yourself living in over the long haul. Ideally, you should plan on sticking around for at least five years. Selling too soon after buying is a really expensive endeavor, so you’ll want to make sure the area you’re considering is a place you can see yourself living in for a while. Consider the cost of living, proximity to work, school district, amenities, and social setting before you settle on a particular neighborhood.

The Bottom Line

The quest for a home purchase starts long before you even start looking at listings and visiting open houses. Before you begin the process, it’s critical for you to get your finances in order and prepare yourself financially for such an investment. Take the above steps to help ensure that you don’t encounter any unpleasant surprises along the way and that the home buying process is a streamlined one.

There are ways to use leftovers that go beyond the usual soup. But a quick soup can be made by quickly sautéing sliced onions, celery and carrot till soft. Add a quart of low sodium organic chicken stock. Simmer 10 minutes then add two cups each chopped turkey and cooked noodles.

Shepherd’s pie is an easy after the holiday meal. Sauté ½ cup each carrot, celery and onion. Add 1 teaspoon dried thyme and cook till fragrant. Add two cups chopped turkey. Make a slurry mixing 1 tablespoon corn starch with 2 tablespoons water. Pour over turkey mixture and cook till thickened. Pour into an 8X8 casserole. If you want to be fancy, pipe mashed potatoes all over the top or just drop small spoonful’s till completely covered. Bake 400° till bubbly and mashed potatoes are golden, about 20 minutes. For a different topping cover with puff pastry and bake per package instructions.

Quick black bean turkey chili is different and flavorful. Sauté ½ cup onion and green pepper along with one medium seeded jalapeno (leave seeds in for more heat). Add one tablespoon each chili powder and cumin and cook till fragrant. Add one quart chicken stock along with one 15oz can each chopped tomato, kernel corn and rinsed black beans. Throw in two cups cooked turkey and simmer 15 minutes. Serve with jalapeno corn bread (add chopped jalapeno to corn bread batter).

I usually make extra mashed potatoes just to make these later. Cheesy potato patties are so yummy I make them whenever I have mashed. Combine three cups mashed potatoes with two cups shredded cheddar cheese. Add milk a little at a time till it’s workable. Make the patties hamburger sized and salt and pepper. Fry till golden in butter with a little canola mixed in to prevent burning. Drain on paper towels. Serve with sour cream if you like.

KATHLEEN WEAVER-ZECH & DEAN’S TEAM CHICAGO

When it comes time to sell your home, take a close look around and see if your place has the goods that buyers are looking for. Considering the magnitude and expense of such a purchase, buyers want to fall in love with the home they plan to buy, and certain characteristics can help make that happen.

It might be worth your while to add or upgrade features in your home to help attract more buyers, and thereby draw in more offers.

Here are 8 traits in a home that buyers look for before making an offer.

1. Eat-In Kitchen

Just about every buyer expects to see an eat-in kitchen when they’re searching for a new home, especially if they’ve got kids. The kitchen is the hub of the home and is much more than just a space to prepare meals. If your kitchen doesn’t currently have the space for a table and chairs, you might be able to create this space by removing a wall rather inexpensively, as long as there is no additional repair work that has to be done.

2. Open Concept Layout

Newer homes offer spacious floorplans and soaring ceilings that older homes simply don’t have. Homeowners love to be able to entertain guests and converse with them no matter where they happen to be, and parents love the idea of being able to see their kids from every angle of the living space. An open concept layout is a must-have for situations like these. 

3. Spacious Laundry Room

Homebuyers want a laundry room that’s not just conveniently located, they also want it to be spacious enough that they can do all the pre-washing, folding, and ironing all in one space. Having a space like this can help keep the mess out of your bedroom or living space, and prospective buyers will see that as a major advantage.

If you don’t currently have an existing laundry room, you don’t necessarily have to create an addition to get one. The basement is typically the easiest place to put one and can cost as little as $1,000 to create.

4. Energy Efficiencies

Homebuyers are much more environmentally conscious these days, and anything that they can do to contribute to the health and protection of the planet is a welcomed idea. One of the most effective ways to minimize their carbon footprint on the earth is having a home that operates much more efficiently. In particular, energy efficient appliances and windows can help to significantly reduce wasted energy, and even slash utility bills. The combination of saving the planet saving money is something that just about every buyer finds extremely attractive.

5. Garage Storage Space

Storage is often a huge issue for homebuyers, especially those with growing families. Of course, smart indoor storage options are critical, which include walk-in closets and oversized linen closets. However, added garage storage space is a bonus, especially when it comes to storing larger items, such as Christmas trees, lawn furniture, and large tools. This added space helps to cut down on the clutter inside the home and is just a few feet away for easy access.

6. Hardwood Floors

Hardwood flooring offers a more modern, clean look compared to other flooring options. It’s durable, easy to maintain, and doesn’t induce allergies like carpeting can. Good quality hardwood can last a lifetime and can be easily refinished every so often to achieve a new look. Buyers have come to expect hardwood in the homes they plan to purchase, so if your home currently has dated flooring, you might want to consider installing hardwood. The cost to install 120 square feet of hardwood is approximately $1,400, which you can easily recoup come sale time.

7. Exterior Lighting

Having your home beautifully lit up on the outside provides a welcoming feel and can easily draw the attention of buyers before they even reach the front door. Not only does exterior lighting create a wonderful look and ambiance, it’s also a security feature for your home.

8. Patio

Considering the mild climate in California, there’s no reason not to enjoy the outdoors year-round, and having a patio can make it a lot easier and more convenient to spend time outside. While the condition and esthetics of the interior of a home are critical, so is the outdoor living space which is quickly becoming one of the most important traits of a home for buyers. 

The Bottom Line

When you’re thinking about selling your home, it’s helpful to understand exactly what buyers are looking for. If your home is currently not equipped with any of these highly coveted features, you might want to consider making a few upgrades to your home before listing it for sale. Done right, they could increase the value of your property and allow you to command more money when you sell. Just make sure you seek out the advice from an experienced real estate agent to make sure the changes you plan on making will bring you the return on investment you’re looking for.