Pro tip: watch the prepayment penalty clauses on private money loans

I used to think all prepayment penalties were basically the same, but after seeing a guy get hit with 5% of the remaining balance on a 3 month flip loan, I changed my mind. He borrowed $200k and paid it off in 8 weeks, cost him $10k extra. Has anyone else had a lender try to slip in a penalty that kicked in way earlier than you expected?

3 comments

3 Comments

terry_carter151d ago

Yeah, @felix_lane99 is right. Used to think flat fees were no big deal, now I see the trap.

claire_ramirez1d ago

Saw a guy on BiggerPockets get stuck with a 6 month hard prepay on a 2 month deal once.

felix_lane991d ago

5% of the remaining balance" is brutal, I always negotiate a straight flat fee instead.