Give Your Mortgage a Makeover
Is it time to refresh your mortgage? If your current mortgage payment has been a part of your life for more than a few years, don’t assume your mortgaging options are few and far between. Not so. A mortgage makeover could have you looking at your monthly payment in a whole new light.
With interest rates still holding near historic lows, refinancing your current mortgage could result in significant savings. But refinancing is about more than just today’s lending environment—it’s a viable option for homeowners who can lower their interest rate and expect to stay in the home long enough for the savings to offset the costs involved.
Significant improvements in your credit score could increase the likelihood of lowering your interest rate. In addition, refinancing presents an opportunity to adjust the term of your mortgage to fit your priorities. A shorter term may allow you to increase the pace you are building equity. Combined with a lower rate, it’s possible your payment may not increase substantially. Alternatively, refinancing to a term longer than your remaining mortgage can lower your payment to free up money for other priorities, but may increase your interest costs overall.
Homeowners who have reached the age of 62 since their previous mortgage have a unique option to revamp a long-established mortgage. A home equity conversion mortgage (HECM), or reverse mortgage, allows them to borrow based on the equity they have in the property. Repayment is deferred as long as the home remains their primary residence, and responsibilities such as insurance, taxes, and maintenance continue to be met.
The access to additional funds and the elimination of a monthly mortgage payment can be a useful tool for seniors looking to add flexibility to a retirement plan. A HECM for Purchase is also available for those wanting to combine the benefits of a reverse mortgage with their plan to buy a new home, cutting the cost of a two-step approach.
The simplest way to save money and rejuvenate your mortgage requires no credit check, income verification, or closing costs. If a recent raise or better budgeting has made a larger payment possible, consider increasing the principal payment on your current mortgage.
Paying down the balance faster will reduce the amount of interest you pay over the life of the loan without committing you to a larger payment for the entire term. While it requires some discipline, there are tricks to encourage the habit.
Paying half your mortgage every two weeks rather than the full payment once a month will result in 13 total monthly payments rather than 12. Rounding your payment up and creating an automated debit can make the task seem more manageable. Another tactic that can add up significantly over time is committing your non-regular income, like tax refunds, bonuses, and gifts, toward your mortgage balance. Remember to contact your lender for any steps you need to take to make sure your extra payments are applied appropriately.
Don’t just go through the motions with a mortgage you have outgrown. Let the experienced staff at Open Mortgage explain how to bring your borrowing up to date. Start the conversation on our website or by calling us today.
- At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
- Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
- The loan balance grows over time and interest is charged on the outstanding balance
- The borrower remains responsible for property taxes, hazard insurance, and home maintenance, and failure to pay these amounts may result in the loss of the home
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment