If you want to save some real money this holiday season, why not give yourself the gift of a home loan modification? In this buyer’s market, refinancing your mortgage can save you tens of thousands of dollars on your interest, and it can even reduce the period of your loan by five or more years. Here are a few ways you can adjust your mortgage to best work for you:
- Lower your interest. If you originally took an adjustable rate mortgage on your home and aren’t planning on moving any time soon, it pays to refinance and opt instead for a lower-interest fixed-rate mortgage. By renegotiating your 6% interest ARM to a 5.5% fixed-rate home loan, you can save more than $100,000 in interest over a 15-year period.
- Shorten your period. With defaults on home loans at an all-time high, the number-one priority for lenders is getting back the money they lent you. They’re often willing to give up a few years of interest in order to shorten the period on your mortgage, and this is always in your best interest if you’ve got the income to handle it. While shortening your loan’s period might increase your monthly payments, it will save you thousands on interest in the long run.
- Turn your equity into a cash out. Your equity is the difference between what your home is worth and how much you’ve got left to pay. If you undergo a home loan modification for an amount greater than what you still owe on the home, you can “cash out” on part of your equity. This means you’ll get a sum of money in exchange for receiving less cash when you sell the home. This is a good idea if you want to build an addition or start a college fund for your child. This is not a good idea if you need the cash to pay off unsecured debts, like credit cards.
The weak housing market has given homeowners a variety of home loan modifications to choose from. By refinancing your mortgage, you can pay less for your house, pay off your house faster or even cash out on part of its value. If you want to know more about these modifications, contact your loan officer today.