Buying a home is not easy, and for many people, it can seem impossible to have a place to call your own. It is easy for some people to take out a mortgage and commit themselves to monthly payments. Yet, actually making those payments can get harder as time goes on. As a result, they may face bankruptcy or eviction.
Luckily, there are several ways to avoid bankruptcy and keep making payments on your mortgage. For starters, you can refinance it for better interest rates with a new lender. However, you could also get a mortgage recast and make making payments easier on yourself.
When you re amortize your loan, you pay extra into your mortgage to put yourself ahead of the amortization schedule. You may a lump sum into it to put yourself ahead, or you may diligently pay a little extra with each bill. Then your lender will recalculate the amount you need to pay each month based on how much of the debt you have covered.
While that may sound perfect for several kinds of people, not everyone can afford a mortgage recast. Refinancing and recasting help different kinds of people. To learn which one may be right for you, keep reading below!
Doing A Re Amortization on Your Loan Reduces Financial Burden
A re amortization is an elegant way to bring down your monthly payments while maintaining financial stability. By getting a mortgage recast, you can stick with your current lender and keep the same mortgage, but also bring your monthly costs down. All it takes is a little extra work to get one.
To get a mortgage recast, you need to pay extra towards the mortgage. You will only be eligible for a mortgage recast after you reduce your debt more than you are scheduled to. You need to pay more than you are expected to every bill, or you need to contribute a large amount of money at once to pay off the debt.
Once you do that, you just need to apply for a mortgage recast, also referred to as re amortization. Your lender will look at how much you have paid off your debt and compare it to your repayment schedule. Then, they will replace your current monthly mortgage bill with another one.
You will still have a set date for when you will be done paying off your loan. You will just need to pay a little less towards it each month.
You Maintain the Same Amortization Schedule
When you first take out a mortgage, your lender creates an amortization schedule for you to follow. This schedule shows how you will repay your mortgage and the logic behind every repayment. It breaks down what will be expected of you as you pay back the lender and the reasons why.
Most importantly, this schedule shows you the data that you are expected to repay the loan by. If you stick the payment plan outlined in the amortization schedule, you will not have to worry about repaying the loan after that date. If you recast your mortgage, you will still be paid off on your mortgage on that date.
You Continue to Work With Your Existing Lender
Another advantage to re amortizing your loan is that you get to work with someone you already have an existing relationship with. Moving to another lender for a cheaper loan can cost more than you expect. Most of the time, it is better to stick with someone that knows you and your financial situation.
When you stick with an institution that knows you, they will be more likely to understand if you have trouble making payments. They will also try to entice you to stay with them if it appears like you are thinking about leaving. Many institutions will try to keep you around, and you can use that to your advantage.
If you have been paying off your loan faster than expected, they will likely work hard to keep you around. You may be able to renegotiate your interest rate or more by applying to recast your mortgage. It can be the start of better deals, just for sticking with your existing lender!
Refinancing Lets You Take Back Control
Refinancing your mortgage is a lot like recasting it. You usually end up with lower payments at a better rate, and you can enjoy more financial stability as a result. Yet, the process for achieving that stability is different when you choose to refinance.
When you refinance your mortgage, you basically replace your loan with another one for the same value from another lender. Only, your new lender may offer better incentives or better interest rates. Refinancing is basically just trading your loan to someone who will take better care of your mortgage.
It also lets you keep control over how your mortgage is handled. If you are unsatisfied with your existing lender, you can simply change them. All you need to do is find a new lender who will pay off your old one and sign you onto a new, similar mortgage.
Lower Interest Rates Are Very Interesting
The biggest advantage to refinancing your mortgage is that you get to renegotiate your interest rates. Sometimes, the market changes and new opportunities emerge for you to save money. The market may offer lower interest rates on new loans, which means you should refinance your old one.
Refinancing also lets you sidestep the typical application process, usually. Since it is established that you are eligible for loans by virtue of already having one, you are usually pre-qualified for refinancing. That means you can find almost anybody to refinance with and get lower interest rates.
Only You Can Choose Between Re Amortizing or Refinancing
Choosing between recasting your mortgage and refinancing it is not an easy decision. On the one hand, re amortizing your mortgage will reduce the amount of money you pay each month while keeping you connected with your lender. Yet, it can also be expensive and not everybody can afford it.
Refinancing may reduce your overall cost by bringing down your interest rates. You will not need to pay extra to bring your costs down. Yet, it can also cost you your relationship with a lender, and it can be risky going with a new one.
Whichever you choose, you should go with a lender you can trust. Choose us for any of your lending needs, and we will make sure you are comfortable with your mortgage.
7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with every phase of each mortgage transaction. If you are searching for a home loan in New Jersey, Pennsylvania, Virginia, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.