HEDCO will provide prepayment estimation upon request by the borrower. The following provides some general information and guidelines for loan prepayments.
- A prepayment premium will be assessed when the 504 loan is paid off BEFORE half of the loan term has lapsed
- Prepayments are made once a month on the 3rd Thursday before 9 a.m. Pacific Standard Time.
If you would like to request a prepayment for your loan:
- Send HEDCO an e-mail or mailed notice requesting the prepayment 30-days in advance
- The month and date of the 3rd Thursday you would like the prepayment to be made
- The 504 loan number and property address
- Contact’s name, phone number and e-mail address (if available)
- Name of escrow company (if available)handling the transaction and lender
The Central Servicing Agent will provide the final prepayment figures 3 days before the payment is due.
Partial payments or principal only payments are not allowed since the 504 loan is a fully amortized facility.
The prepayment premium is applicable only during the first half of the loan term. The premium is interest due on a declining scale based on the loan balance when the repayment is made. For the 20 year term, the premium declines by 10% progressively each year until it zeros out. For example, for the first six months, the premium would be the annual interest on the beginning loan balance of the loan. Then, for the next six months, the premium will be the annual interest on the balances of the sixth month. In the 2nd year, the premium will be 90% of the annual interest based on the loan balance.
The SBA cannot repurchase the debenture for a prepayment until the semi-annual payment date. Therefore, if a denture’s semi-annual payment is due in March and September, and the prepayment is in May, the prepayment amount will include interest from May to September.