Strategies for Renegotiating Your Mortgage

Boom in five-year mortgage deals

If you, like many Americans, are struggling to make your monthly mortgage payments, you are not alone. The current economic situation has left many in similar circumstances, but there is a silver lining: banks are now more willing than ever to work with you.

Due to the high number of foreclosures, banks prefer to negotiate rather than foreclose, as foreclosures often result in financial losses for them. They understand that the best way to secure their money is to collaborate with borrowers.

Preparing to Renegotiate

To renegotiate your mortgage, you’ll need to gather several documents that demonstrate your financial difficulties. These include credit card statements, loan statements, unemployment information (if applicable), your most recent paycheck stub, the last two years of tax returns, and details of your checking, savings, and any other investments.

Methods for Renegotiating Your Mortgage

There are two primary ways to renegotiate your mortgage, and the best option for you will depend on various factors.

  1. Work Directly with Your Lender: Contact your lender and explain your difficulty in making monthly payments, providing reasons such as job loss, injury, illness, or other circumstances. Ideally, you should reach out to your lender before you miss any payments. In the past, lenders were less receptive to this approach, but they now prefer to address issues early.
  2. Consider Refinancing: If you have more than 10% equity in your home and a credit score of 720 or higher, refinancing might be a viable option. Refinancing can secure a lower interest rate and reduce your monthly payments to a more manageable level. You can start with your current lender, but also consider mortgage brokers or shop around for the best rates. Credit unions often offer competitive rates, so don’t overlook them.

Additionally, think about altering the terms of your loan. Switching from a fixed-rate mortgage to a five-year adjustable-rate mortgage could lower your interest rate and monthly payments, which is beneficial if you plan to move within five years.

If you’re struggling with your mortgage payments, don’t lose hope. Many others have been in your position, and lenders are generally willing to work with you. Even if your current lender isn’t cooperative, other lenders may be eager to take on your business. Remember, renegotiating your existing mortgage is typically easier than securing a new one.

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