Mortgage refinancing and home loan modification can be two great things. However, they are different and depending on your financial position, and goals, one of them will be more beneficial than the other. Here are the differences between these two different ways of changing your mortgage.

Mortgage refinancing is simply taking out a new home loan, and paying off your old mortgage with the new loan. Hopefully, the interest rates are lower than your previous rates, however there are a few different reasons to consider a mortgage refinancing. Some homeowners simply want lower mortgage payments, but have bad credit, some want cash out from their homes equity, and most want lower interest rates. Refinancing a mortgage to get cash back is also known as a cash out refinance. A cash out refinance is when a homeowners newly gotten loan through refinancing is bigger than the old loan amount. The different betweenthe two loans will go straight into the homeowners pocket. This is a great way to gather up a large sum of money for any reason. Always remember though that all the money you borrowed will need to be paid back.

Some homeowners want to take advantage of the record low mortgage rates, and save money through reduced interest payments. This is happening all over the country right now because home loan rates are so low. Just a few years ago a 30 year fixed rate mortgage was at around 9% while today the same loan can be gotten for 5% or so. This is a dramatic different in payments, and lowers the homeowners monthly mortgage payment, or cuts some years off of their home loan. Taking advantage of lower interest rates is almost always a good thing. Reducing the amount of time you pay your home off in is always a good choice to make. This results in much lower interest payments over the course of the home loan.

Mortgage modification is much easier to understand, but a lot harder to get approved for. A home loan modification is typically when a homeowner is facing some kind of financial hardship, and is at risk of losing their home unless action is taken. When a homeowner modifies a home loan, everything stays the same except for the interest rate, and the length of the mortgage. A home loan modification is not a new loan, it is a modification of your current loan. Homeowners are less likely to get approved for this because generally mortgage lenders and banks will lose some of the profit from granting you a mortgage that they counted on. However, if you can prove that you are facing financial problems, this is much easier to get, and can be better than a refinancing, especially for a struggling homeowner.

-M Petrone

Subscribe via email

Enter your email address:

Delivered by FeedBurner