This Method Can Lower Your Monthly Mortgage Payments Without Refinancing


Lower monthly mortgage payment may seem like a very attractive proposition as it will free up some wiggle room in your budget. However, you cannot simply reduce the monthly payment. You have made a commitment to the lender and must comply with the terms of the loan.

Refinancing can be a good way to reduce your payment – if you can qualify for a new loan at a lower interest rate than you are paying now.

But getting a new home loan isn’t necessarily the only way to keep your monthly mortgage costs down. There is another option: you can change the mortgage.

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What does a mortgage change mean?

Revising a mortgage or re-amortizing a mortgage involves making a lump sum payment of the principal on a home loan to pay off part of the balance. You then ask the bank to create a new repayment schedule based on the remaining lower principal balance.

Let’s say, for example, you owe $ 300,000 on your mortgage. If you want to change the size of your mortgage, you will first need to make a lump sum payment. Many lenders require a payment of at least $ 10,000 to be eligible. After you make the lump sum, you will ask your lender to re-amortize your loan. This means lenders will change your payment schedule.

You see, your monthly payments are based on the interest due, as well as the amount of principal you have to pay each month to pay off your loan in full on time. If you make a one-time payment, you will reduce the outstanding loan balance. As a result of this reduction in principal, you will not need to pay the same amount of principal and interest every month to pay off the loan on time.

How to change your mortgage

If you are just making a one-time payment, your monthly payments will not automatically change because of this; you will still owe the same amount. In this case, you will simply pay off the loan a little earlier because of the lump sum you sent.

However, you may have option change your monthly payments by simply asking the lender to change the loan amount. If your lender allows it, they will recalculate the new monthly payment based on your new lower principal balance, thereby reducing your monthly debt.

You will pay a small commission for this service – usually around $ 250 – but you will receive these lower payments for the remainder of the time you pay off your loan.

Should you reconsider your mortgage?

A mortgage renegotiation will not lower your interest rate, unlike refinancing. You also won’t change the repayment schedule. If you have 20 years of credit left, you will still get it after the rework.

But it can be a good option if you have a financial windfall and want to use it to lower your monthly home loan amount.

You don’t have to pay closing costs for rework, as is the case with refinancing, and lower monthly mortgage payments, which as a result can give you more wiggle room each month for the remainder of the repayment period.

You should carefully consider whether this approach makes sense for you or whether refinancing might be the best approach to reduce your debt. mortgage lender every month.

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