Ways to Renegotiate Your Mortgage

If you are like many Americans struggling to make your monthly mortgage payment, you are not alone.  While the current economy has many struggling, the good news is that banks are more likely now to work with you than ever before.

Because banks have had to foreclose on so many homeowners, they would rather negotiate with you than have another foreclosure where they will likely lose money.  Banks want to get paid, and they now understand that the best way to get their money is to work with you, the borrower.

What You Need Before You Begin to Renegotiate

If you would like to renegotiate your mortgage, you will need several documents to prove that you are having a hard time making your payments.  You’ll want to round up your credit card statements, loan statements, unemployment information (if applicable) or your last paycheck stub, your last two years’ tax returns, and your checking and saving information as well as possibly other investments you have.

Ways to Renegotiate Your Mortgage

There are two main ways you can renegotiate your mortgage.  Which way you chose depends on several variables.

1.  Work with the lender.  Call the lender and honestly tell them that you are having a hard time making your monthly mortgage payment.  You will need to also tell them why you are having trouble, whether that be because of job loss, an injury or illness or another reason.

Ideally, the best time to work with the lender is before you fall behind on your payments.  This was not traditionally the case, but times have changed, and the lender wants to hear from you and work with you as soon as possible.

2.  Consider refinancing.  If you have more than 10% equity in your home and a credit score of 720 or higher, you may be a good candidate for a refinance.  Refinancing can lock you into a lower interest rate and give you a lower monthly payment that you will be able to afford.

While you may initially work with your own lender on a refinance, that is not your only option.  You can contact a mortgage broker who can help you find the best offers, or you can look around yourself and compare rates.  If you belong to a credit union, don’t forget that credit unions often offer lower rates than banks do.

In addition, consider changing the terms of your loan.  If you have a fixed rate mortgage, a 5 year adjustable rate mortgage may give you some breathing room with a lower interest rate and lower monthly payment.  This alternative is especially attractive if you plan to move within 5 years.

If you are having trouble making your mortgage payment, don’t despair.  You are certainly not the only one who has been in this situation, and you will likely find your lender willing to work with you.  Even if your lender isn’t, there are likely other lenders who will work with you and be glad to get your business.  Remember, in general renegotiating your existing mortgage is easier than getting a new mortgage.

source: everythingfinanceblog.com

Lifestyle changes and how they affect your mortgage

Maybe you just lost your job. Perhaps you just had a baby. Or,maybe you’re planning your wedding. No matter the reason, any time your lifestyle changes is an opportunity to evaluate your home loan, to help you reduce your expenses and maximize the money in your pocket.

Major Illness or Job Loss

If a pink slip or a major illness knocks you out of work for a few months, you may panic as you wonder how you’re going to make ends meet. Fortunately, there are ways to rearrange your mortgage to make the situation work for you.

Your first step may be to refinance. Use a mortgage calculator to see how much you could save by refinancing to a loan with a lower interest rate; mortgage rates are currently near historic lows, meaning now is a great time to shop around. Depending on your current interest rate, a refinance could save you hundreds of dollars a month in mortgage payments.

If that’s not enough, you may consider a forbearance. This option allows you to halt your mortgage payments, typically between six and twelve months, until your financial situation is less dire; then, you’ll have another six to twelve months to repay the interest and principal payments that accumulated while you were out of work. Most lenders will only offer a forbearance to borrowers who can prove their financial hardship is temporary, typically lasting six months or less.

Here Comes the Bride

If wedding bells are in the future, it’s a great time to look at your mortgage using a home loan calculator. Marriage means not only joining your lives, but your finances as well. If you’re in the market for a new home, adding in a second person to your family – and a second income – can increase the amount you may qualify for. If your partner has a strong credit score, he or she may also help you qualify for a lower interest rate based upon it.

You may be tempted to draw money out of your property to pay for your wedding through a cash-out refinance. This is where you liquidate some of the equity in your home to pay for expenses. If at all possible, resist the urge. For one thing, a wedding is a day, while your home is your shelter for months, maybe even years, down the road; reducing your financial stake in your home to pay for a one-day party is putting the cart before the horse. If you need more convincing, you should know that withdrawing some of your home’s equity will lead to higher mortgage payments, since you’ll have a higher principal to pay down on the loan.

And Baby Makes Three!

If your major lifestyle change involves starting a family, you’ve likely already started evaluating everything in your world, whether it’s the arrangement of furniture in a previously unused bedroom (where will the crib go?) to when – or if – you’ll return to work after the baby’s born. Spending some time with a mortgage calculator should be on your list, too.

Although the U.S. Government does not offer paid maternity leave to new parents, you can take advantage of the Family Medical Leave Act, or FMLA, which guarantees new moms and dads up to 12 weeks of leave – unpaid leave. To bridge the gap in finances during that period, consider refinancing your mortgage to a lower rate. Not only could you save hundreds of dollars a month, depending on your current interest rate, but you may also be able to “skip” a mortgage payment while you refinance from one loan to another.

One thing to consider here: my husband and I refinanced right after the birth of our first child. Shortly thereafter, we discovered that our previously-roomy house wasn’t big enough for our growing family. However, the refinance had really locked us in to staying in our home for the foreseeable future. In other words, the birth of a child may not be the best time to make dramatic changes to your mortgage situation.

source: everythingfinanceblog.com