Jonathan Kieswetter, president of Grace Capital Group, a real estate mortgage broker based in Irvine, Calif., says that in rare instances borrowers are throwing caution to the wind and taking the prepayment penalties.
"We're doing one refinancing where the borrower will take a $100,000 prepayment penalty to reduce the interest rate by almost 2.5%.The borrower can make up the loss in less than 12 months, so it will have increased cash flow," says Kieswetter
"California is more creative, more demanding when it comes to loans," Kieswetter
believes."The adjustable rate appeals to borrowers who want the flexibility in and out of the loans fast."
Other ways borrowers look for quick exits include taking on a 15-year loan fixed for three, five, seven or 10 years that then converts to variable rate for the remainder of the term.Kieswetter
says adjustable Fannie Mae multifamily loans are gaining in interest as well.