If you’ve been thinking, “I want someone to buy my home in Idaho,” but you still have a mortgage, it may seem complicated. Chances are you have already figured out that paying off your mortgage balance before you’re supposed to can be a very pricey option.
Alternatively, you could be getting behind on your mortgage payment. Or maybe you have an outstanding mortgage balance already.
The act of making additional payments might incur penalties and fees with a steep price tag. There are also financial consequences for situations where you are unable to pay on your mortgage loan.
Whatever reason you want to get out of a mortgage loan without penalty in Idaho, there is a way out!
Read below to discover the five best ways to get out of a mortgage payment without a penalty, so you can avoid the additional cost or keep out of extra debt.
Idaho Mortgage Laws
No matter what you do in your quest to get out of a mortgage without a penalty in Idaho, be sure you are fully compliant with the state of Idaho’s mortgage laws. If you’re not, it can have far-reaching consequences.
Of course, make sure you read all the fine print in a mortgage agreement. According to the Idaho legislature, parties involved in a mortgage can establish a prepayment penalty. For open-ended loans, this penalty cannot be greater than six months of payments.
However, what exactly is a prepayment penalty, and why does it exist?
Prepayment Penalties in Idaho
Mortgage prepayment penalties in Idaho are a type of fee that can be found in some mortgage contracts.
When you agree to a mortgage, you establish a monthly payment method with a certain interest rate. On average, if you have good credit in Idaho, your mortgage loan will probably have a 2.875% interest rate and a 2.942% APR.
While most people only pay the monthly rate, some may find it more beneficial to pay more than what is due to pay off their mortgage faster. However, in doing so, they can incur a prepayment penalty.
Essentially, a mortgage prepayment penalty is a type of fee that mortgage lenders might charge if you happen to pay part or all of your mortgage payments before the date agreed upon in your mortgage contract.
While it may seem counterproductive, the lenders prefer you pay back the money at the agreed-upon rate, allowing them to collect interest on their investment.
These penalties do not usually apply when you’re simply making a few additional payments. Many lenders will allow borrowers to pay off up to 20% of the loan balance annually.
A mortgage prepayment penalty is usually applied when a borrower is refinancing, paying off significant portions of their mortgage, or selling their home.
Mortgage Penalties and Fees
On top of the possible prepayment penalties in Idaho, lenders can surprise you with additional payments.
They may charge you other mortgage penalties and fees, including appraisal fees, origination fees, title fees, mortgage insurance, and more.
Of course, you don’t want to hear about additional fees, especially when already paying for a mortgage. So, we have a few methods for you if you want to get out of your mortgage but avoid the prepayment penalty – which can reach thousands of dollars.
Ways to Get Out of a Mortgage Without a Penalty in Idaho
There are many ways you can get out of your Idaho mortgage without a penalty, but these five options represent our picks for the best and most cost-efficient methods you can use.
#1: The Strategic Default Way
Though it sounds overly simple, you can strategically default on your mortgage loan to avoid penalties and fees in Idaho. Homeowners who find themselves stuck with homes they cannot sell for more than their mortgage balance can choose to stop paying their mortgage payments.
While you will not incur a prepayment penalty this way, you could face the severe risk of foreclosure.
You can try letting your lender know you’re planning to default on your mortgage loan strategically. They may even try to offer you alternatives to strategic default to get out of your mortgage without a penalty in Idaho.
#2. Walking Away from Your Mortgage
If you are a borrower who has gotten irrevocably behind on your mortgage payments and you can not hope to reconcile your debt, you can stop paying your balance and walk away from your mortgage.
Eventually, your lender will foreclose on the house. That foreclosure is going to damage your credit score and might keep you from buying another home for a long, long time.
Besides that, you’ll also have to find a new place for yourself and possibly your family members.
Even so, in some cases, it can take months or even years before foreclosed borrowers are forced to vacate their homes. For example, you will first enter what is known as the “preforeclosure stage,” but be mindful that your lender might end up charging you late fees.
You could also incur small inspection fees after the loan goes into default.
Usually, the lender is responsible for informing you about how you can avoid foreclosure. They may also send you a notice of pending foreclosure or a “breach letter.”
In the interim, you might be able to negotiate a new deal with your mortgage lender that stops foreclosure and lets you remain in your house.
You can rest assured that the lender will attempt to contact you by phone to discuss mitigation options, including a repayment plan forbearance or a loan modification.
They have 36 days from the time you miss a payment.
Forty-five days after you’ve missed your first mortgage payment, the lender must inform you about your loss mitigation options in writing.
They can also find you professionals who can aid you in avoiding foreclosure. These services will usually be unavailable if you’ve filed for bankruptcy.
#3. Consider a Short Sale
If the value of your home has fallen to a rate that’s lower than your mortgage balance, you can use the short sale technique to get out of a mortgage without a penalty in Idaho. Consider looking into companies that buy houses in Boise or other areas. They may be able to help you sell your house for cash and complete a short sale.
Of course, you’ll need to get your mortgage lender to agree that you can sell your house for less than the remaining loan balance. The lender then receives the proceeds of the short sale as payment for the loan.
Once again, your lender might not agree to this plan. In some instances, your lender can also take you to court for the shortfall. You’ll also have to do all the work of selling your house without seeing any profit whatsoever.
However, a short sale may be the best option for you, especially if you follow these key methods of selling a house.
#4. Consider Renting Your House Out
In some cases, you may be able to rent your home and earn enough money to cover your mortgage payment.
Though you’re not getting out of your mortgage, it will cover your mortgage payment so you can downsize to a more affordable home or move to a new one without incurring a prepayment penalty.
The average rent in Boise is $1,679, and the average mortgage payment in Idaho is $1,228. Therefore it is possible. In a healthy rental market, you could do well. This solution will help you get out of a mortgage payment without a penalty in Idaho.
Renting your home can be done fast. It needs no lender approval, and you get to remain a homeowner without the stain of foreclosure on your credit. You will have to find another place to live. If you have a good income, you can buy or rent another home for yourself.
If you’re looking to rent because you’ve fallen on hard times financially, you can find a new job or save some of your income so that you can re-occupy your home and continue making mortgage payments without subletting.
Your Big Takeaways
If you keep thinking, “I want to sell my house fast in Eagle” but are concerned about the mortgage and legal repercussions, consider our four options above.
Once you understand why you incur penalties and fees when trying to get out of your mortgage payment in Idaho, you can better plan a strategy to ease your financial burden or move out of a home you no longer want.
Though you can always pay your loan off early, the prepayment penalty can be an exorbitant cost. Plus, simply allowing your lender to foreclose on your home if you can’t afford your payments can be detrimental to your credit.
Whatever your reasoning and whatever you decide, always remember that these are all legitimate financial decisions. Sometimes taking a hit to your credit is the right call for your unique situation. However, if you want to avoid it, you still have several other options that might make it possible to get out of a mortgage without a penalty in Idaho.