Useful Tip to Lower Your Mortgage Payment
This morning I read about a way to lower your monthly mortgage payment without refinancing. It is something I had never known about before. It is called recasting or re-amortization. It is described in this New York Times Article.
The way it works is that some lenders will allow you to pay a lump sum towards principal on your existing mortgage loan. They then will reamortize the loan, under the original interest rate, over the remaining term of the loan. It does not change the rate nor does it extend the term of the loan. It does, however, reduce the monthly mortgage payment as well as save interest over the life of the loan.
The article suggests that it is a useful tool for those who may not be able to refinance due to some past credit issues or who perhaps do not want to pay the fees associated with a refinance and for those who may have a lump sum of cash from maybe an end-of-year bonus (do people still get those?) or maybe an inheritance. Recent buyers may find it a useful tool to reduce their monthly payments if they expect maybe a decent tax refund.
While it is not generally advertised, it is a program that some lenders are willing to use. According to the article, most lenders will charge an administrative fee in the area of $150.00. And, some lenders may have a minimum amount that they require the homeowner to put down.
This is definitely not something that everyone can or should do. However, for those looking to reduce their monthly payment and save interest over the long term, it is worth looking into. Of course, if you are lucky enough to have a large lump sum of cash, it might also make sense to do an analysis of whether you would save more money by investing that cash wisely or to do a recasting of your mortgage. I find it to be helpful to look at all options when making a financial decision.
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Christine Smith is an Attorney and Exclusive Buyer Agent with over 25 years of experience in the real estate field.
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