Paying Down Your Mortgage

When the situation arises that you have a lump sum of cash to pay down your existing mortgage, there may be different options available. Pre-paying principal on a fixed-rate mortgage shortens the term of the mortgage but the payment stays the same.

Conversely, recasting a mortgage with a lump-sum principal payment lowers the principal and interest payment but leaves the term intact with the same payoff date.

The interest rate on the mortgage will stay the same regardless. Prepaying principal can be done at any time but may not be applied until the next payment date. Recasting cannot be done within the first 90-days of a mortgage.

Pre-paying principal is like driving faster on a trip to a specific destination to get you there sooner. Recasting/Re-amortization gets you to the destination at the same estimated time of arrival but using less fuel.

Most loans allow you to pre-pay principal, but recasting is not allowed on FHA, VA, and GNMA. If you have a conventional loan, check with your lender to see if it is possible.

Contact your mortgage servicer for specific information on pre-paying or recasting your mortgage before acting.

Comments

Make Your Home Offer the Most Appealing

Sales in February 2023 were up 14.5% month over month and still down 22.6% year over year according to the NAR Housing Snapshot. The median sales price dipped 0.2% to $363,000 and there are 2.6 months supply of homes on the market compared to 1.7 months a year ago. "Inventory levels are still at historic lows, and consequently, multiple offers are returning on a good number of properties." According to Lawrence Yun, Chief Economist for the National Association of REALTORS�. It is still important to have a strategy for potentially competing with other buyers on the house you want to buy. The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation. Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes. Include the written pre-approval letter along with the offer

Rethinking Backup Offers

Like with any professional, there are tools and techniques available to help with particular situations. They might be more popular at certain times and might even be put aside or forgotten at others. For real estate professionals, one of those is the backup offer. In a situation where there are multiple offers, the seller can accept any offer for whatever reasons are important to them, leaving the makers of the other offers disappointed. There is always some uncertainty that the buyers on a contract will close accordingly. To hedge on that possibility, the seller may choose to make a counteroffer to one or more of the other offers to be a backup should the primary contract not close. From a buyer's perspective, the purpose of a backup offer is to be next in line to have the chance to purchase the property should the first contract fall through. The benefit is that you'll be next in line to purchase the home without having to submit another offer and possi

When do you lock your mortgage rate?

Locking your interest rate protects you from increases due to market conditions. Locking early safeguards your budgeted payment. By locking the rate, if the market goes up, you get the lower rate; if it goes down after the lock, you may be able to pay a fee and lower the rate. Knowing when to take the lock is determined by which direction you think the market is going. If you think rates are going up, lock in early. If you think rates are going down, ride the rate to within a few days of closing. Some lenders may allow a borrower to lock a rate after pre-approval but is more common to not offer a lock until there is a signed contract on a home. Even with a pre-approval, it could easily take 30 days or more to close a transaction and the rates can move a lot in that period. There may be a fee charged to lock a rate which is determined by the lender. Generally, the longer the time for the rate lock, the higher the fee. There is a lock period established by the l

Welcome to Chapin Real Estate Blog

Search This Blog