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Monthly Quote

“An optimist is a person who starts a new diet on Thanksgiving Day. “

Irv Kupcinet, journalist, (1912 – 2003)

Tip Of The Month

You may think that your evergreens will “weather” the winter just fine since they retain their color throughout the season. However, like other plants and trees, evergreens need winterizing. Here are some tips to help your evergreens withstand the cold:

• Autumn watering. In winter, narrow and broadleaf evergreens lose water through their leaves and cannot replace it because the soil may be frozen. In mid to late fall, make sure the soil is watered well. You can even water in mid-winter if the temperature is above freezing.
• Preventing breakage. Evergreens can suffer breakage from the weight of snow or ice. Prevent this by fastening heavy twine at the base of the tree and winding it up to the top and back down again, in a reverse spiral. Be sure to remove the twine before growing season.
• Protecting young plants. Use burlap screen stretched around three stakes to protect young or vulnerable plants, especially those located in south, west and windy exposure areas. Wrap most of the plant, but leave the top exposed so the plant still gets sunlight.

(Source: Gardening All-in-One for Dummies, the National Gardening Association, Wiley Publishing, Inc., 2003)

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The Low Down on Prepayment Penalties

A recent Realty Times article brought some long-needed understanding to the sometimes-confusing world of the pre-payment penalty.

A pre-payment penalty is relatively simple to understand; it is all the surrounding information that can get a little tricky. A pre-payment penalty is essentially a clause in your mortgage contract that gives your lender the right to charge a fee if the loan is paid off within a certain period of time. Fortunately, most pre-payment penalties are only for a period of one to three years.

A typical pre-payment penalty will be for three years, with an associated fee of 3% of the outstanding balance if the loan is paid off within one year, 2% if the loan is paid off in the second year, and a fee of just 1% if the loan is paid off in the third year.

So why does such a clause exist? Essentially, in today’s demanding market, where there is a huge array of different mortgage options, numerous ways to reduce points, and lower interest rates, the last thing most lenders want is to have given up some fees and points in exchange for a slightly higher interest rate, in which the lender is paid a premium, to then have the borrower refinance. That is the key motivation behind this entire pre-payment debacle: lenders are trying to prevent people refinancing repeatedly.

Before getting too worked up, you should first check your state law. In some states, they prohibit pre-payment penalties, so you do not have to worry. The other good news is that most pre-payment penalties only apply when paying off your loan through refinancing. Therefore, you are completely free to sell your property within the pre-payment penalty period.

Old-fashioned, fixed-rate mortgages are unlikely to have a pre-payment penalty associated with them. The more likely candidates are adjustable-rate and interest-only payment mortgages.

The two keys to not being caught out by pre-payment penalties are:

One – Make sure you completely understand the pre-payment terms of your loan. How many years is it? Three? One (also called a soft pre-payment penalty)?

Two – Decide what you are comfortable with based on your plans and your mortgage. If you are unhappy with anything, then your lender will be able to present you with other options that better suit your needs.

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