The advantages of a great prepayment penalty getting HUD 232 funds is actually that it facilitate manage lenders regarding the financial losings they’re going to incur in the event the just in case a debtor chooses to pay-off their mortgage very early. Prepayment charges are typically flexible, but usually have a-two-year lock-out months followed closely by an excellent 8%- 1% step-down superior (we.age. 8,seven,6,5,4,3,dos,1). Thus if the a debtor made an effort to pay off the financing on the fourth-year, they might deal with good 7% prepayment penalty. Compared, whenever they waited up until the 6th seasons, the new punishment create miss to 5%.