The Difference Between Modifying Your Loan and Refinancing: What You Need to Know
When you struggle to make your monthly mortgage payments, you may first think of modifying your loan. This can be a great way to reduce your payments and get them more aligned with your budget. However, there are some things you need to know before you decide whether or not to modify your loan. This blog post will discuss the difference between changing your loan and refinancing and help you decide which option is best for you!
What’s the Difference?
You first need to know that modifying your loan and refinancing are two different things. When you modify your loan, you are simply changing the terms of your existing loan. This can include extending the length of the loan, reducing the interest rate, or changing the type of loan from an adjustable-rate mortgage to a fixed-rate mortgage. Refinancing, on the other hand, is taking out a new loan to replace your existing one. This can be a good option if you have improved your credit score since taking out your original mortgage. In addition, it may allow you to get a lower interest rate. It can also be a good option if you want to cash out some of the equity in your home.
What Do You Need To Consider?
There are a few things to consider before deciding whether to modify or refinance your home loan.
One crucial factor is the cost of doing so. Modifying your loan may have lower upfront costs than refinancing, but it could also cost you more in the long run if you extend the term of your loan.
Another factor to consider is how much equity you have in your home. If you have a lot of equity, you may be able to get a better deal by refinancing. However, if you don’t have much equity, you may not be able to get a lower interest rate by refinancing, and it may not make sense to do so.
Terms of Your Current Lender
Finally, you’ll need to consider your current lender and whether they are willing to work with you to modify your loan. Suppose your lender isn’t ready to work with you or doesn’t offer competitive rates. In that case, it may make more sense to refinance with a different lender.
Thinking of Refinancing Your Mortgage in 2022?
If you’re considering modifying or refinancing your home loan, weigh the costs and benefits carefully before making a decision. Modifying your loan may be the best option if you’re struggling to make your payments, but refinancing could save you money in the long run. Talk to your lender and a financial advisor to see what makes the most sense for your situation.