Are you 100% sure about a home loan modification?
Even though a lot of people nowadays are doing it, it does not necessarily mean that it is the right option for you. Refinancing is a huge step, and there are instances where it does not apply, even though it seems like a good idea the first time you hear it.
Think twice about mortgage refinancing if you can relate to one of these people:
Mr. A's home equity value has dropped.
Mr. A. is thinking hard about the status of his home's value. Property values across the nation has gone down, so in most cases it does not make much sense to refinance.
Say that Mr. A gets to refinance up to 75% of his property's new value, he should check to see if his original mortgage is less than that. If it's higher, chances are he won't be able to pay the existing loan with his new terms. Mortgage refinancing wouldn't be helping him at all, if you think about it.
Mr. B will be paying his first loan for a long time.
Let's say Mr. B has an existing mortgage that he has agreed to pay for 30 years. He has been paying that for 20 years now. Good. So he should think really hard before getting another 30-year loan.
For him, another thirty years would mean another reaping of interests. Add to that the obvious costs of closing up a new loan. Once he has done the numbers, it will be clear that he would be paying more in total if he decides to go with it.
Mr. C. only has a few years to go on his existing loan.
Sure, Mr. C may need the cash now, but is it really that grave for him that he needs to get another loan for it? If he only has a few years left in his current one, might as well bear it out and be done with it. Remember, a new loan means he'll be paying a lot more money in the end.
Mr. C should think of other cash flow alternatives that will not put his home at risk and put him in a money losing deal in the long run.
Mr. D has already used enough equity on your first loan.
Lets' say that Mr. D took out a home equity loan of 90% of his home value. Mortgage refinancing might not be for him right now, because good rates for lower loans that that is rare to nonexistent.
When he refinances a 90% or higher loan, he probably needs a loan equal to it or higher. This is now almost a 100% financing option and the rates will be noticeably higher. 100% loans are pretty much hard to find these days anyway.
The lowdown is this: refinancing less than 90% will yield him bad rates, while over 90% will give him higher rates or none at all. Either way is shaky ground, so mortgage refinancing might not be the best option for Mr. D.
Under the right circumstances, mortgage refinancing is a good option. But if you find yourself in similar places as one or two of these people, it is better to re-assess and find other ways to get money and/or solve your mortgage concerns. In the end it is best to see, shop and compare what rates are out there, so you can decide for yourself what to do next.
Even though a lot of people nowadays are doing it, it does not necessarily mean that it is the right option for you. Refinancing is a huge step, and there are instances where it does not apply, even though it seems like a good idea the first time you hear it.
Think twice about mortgage refinancing if you can relate to one of these people:
Mr. A's home equity value has dropped.
Mr. A. is thinking hard about the status of his home's value. Property values across the nation has gone down, so in most cases it does not make much sense to refinance.
Say that Mr. A gets to refinance up to 75% of his property's new value, he should check to see if his original mortgage is less than that. If it's higher, chances are he won't be able to pay the existing loan with his new terms. Mortgage refinancing wouldn't be helping him at all, if you think about it.
Mr. B will be paying his first loan for a long time.
Let's say Mr. B has an existing mortgage that he has agreed to pay for 30 years. He has been paying that for 20 years now. Good. So he should think really hard before getting another 30-year loan.
For him, another thirty years would mean another reaping of interests. Add to that the obvious costs of closing up a new loan. Once he has done the numbers, it will be clear that he would be paying more in total if he decides to go with it.
Mr. C. only has a few years to go on his existing loan.
Sure, Mr. C may need the cash now, but is it really that grave for him that he needs to get another loan for it? If he only has a few years left in his current one, might as well bear it out and be done with it. Remember, a new loan means he'll be paying a lot more money in the end.
Mr. C should think of other cash flow alternatives that will not put his home at risk and put him in a money losing deal in the long run.
Mr. D has already used enough equity on your first loan.
Lets' say that Mr. D took out a home equity loan of 90% of his home value. Mortgage refinancing might not be for him right now, because good rates for lower loans that that is rare to nonexistent.
When he refinances a 90% or higher loan, he probably needs a loan equal to it or higher. This is now almost a 100% financing option and the rates will be noticeably higher. 100% loans are pretty much hard to find these days anyway.
The lowdown is this: refinancing less than 90% will yield him bad rates, while over 90% will give him higher rates or none at all. Either way is shaky ground, so mortgage refinancing might not be the best option for Mr. D.
Under the right circumstances, mortgage refinancing is a good option. But if you find yourself in similar places as one or two of these people, it is better to re-assess and find other ways to get money and/or solve your mortgage concerns. In the end it is best to see, shop and compare what rates are out there, so you can decide for yourself what to do next.
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