Flipping a loan involves repeatedly refinancing an existing mortgage, often luring the borrower with seemingly better interest rates while charging substantial fees for the new loan and prepayment penalties for the old loan. This predatory lending practice can lead to excessive debt and ultimately default and foreclosure for the borrower.
The payoff amount represents the total remaining balance on a loan, inclusive of any prepayment penalties, that must be paid upon settlement to release a lien and transfer the title of the property.
Prepayment penalty is a fee that some lenders impose on borrowers who pay off a loan early, helping the lender recover some of the interest they would have earned if the loan went the full term.
A Yield Maintenance Prepayment Penalty ensures lenders are compensated for the potential loss of interest income if a borrower pays off a loan early.
