Many homeowners tackle household repairs and improvement projects themselves to save money. Yet when it comes to updating their mortgages, these same do-it-yourselfers may not even consider it. Why? Modifying your mortgage can save money, and it's not difficult. Here's how:
A loan modification is simpler than refinancing. When you refinance, you are essentially getting a new loan, so the amount of your monthly payments is reduced, but the length of the term may increase. With a modification to your existing loan, you are keeping the same loan, so the term length stays the same, you are just getting a better interest rate. Refinancing typically has higher closing costs than a modification as well.
The first step in obtaining a modification to your mortgage is to contact your lender. If you are having difficulty making your monthly payments, you may qualify for the Home Affordable Modification Program (HAMP). This government program is designed to prevent homeowners from foreclosure. You will need to be able to present documentation of financial hardship in order to qualify for modification. To learn more about HAMP or to apply, visit www.makinghome-affordable.gov or call the Homeowner's HOPE™ Hotline at 1-888-995-HOPE.
If you do not qualify for this program, you may still be able to get streamlined refinancing. Streamlined refinancing, as the name suggests, requires less paperwork than a regular refinance. And although you have to pay fees for streamlined refinancing, the costs are lower; your lender likely will not require a credit report or an appraisal which can cost $350 or more.
When modifying your mortgage, be sure to shop around. Your lender may offer a lower rate, but charge higher fees, while another lender may have an option that is less expensive to you.