Mortgage renewal is a great way to lower the monthly mortgage payment on your home. After owning your home for several years, the renewal process allows you to take out a new loan on your home for what you currently owe. Your monthly payment can decrease which can lead to more savings for you. However, if you have bad credit and try to renew your mortgage, you may hit a roadblock. Learn how to manage bad credit and still renew your mortgage to help lower your monthly mortgage payment.
Understanding Mortgage Renewal
When you obtain a mortgage, you have a set interest rate on the amount of the home purchase. These numbers will determine the amount of money you pay each month for your mortgage. If you purchased a home for $100,000 and have paid on it for several years, then decide to renew, you would have a new monthly payment based on what you owe now. You may owe only $80,000 on your mortgage loan now so the mortgage renewal amount would be for $80,000.
You can also secure a lower interest rate at this time depending on the current market. This can also help you to lower your monthly payment.
If you have bad credit at the time of renewal, you may run into difficulty securing a loan. However, if you have been making payments on time and choose to use the same lender for your renewal, they may see that you are responsible and go ahead with the new loan. If not, you may have to find alternative options for renewal such as a private mortgage.
If you find that your credit is going to affect the renewal process, you can take some time to take care of your credit. Consider debt consolidation to lower your monthly debt and work to build your credit score back up. Take a break from renewal until your credit has been repaired to see if you then qualify for a new home loan.
If you receive renewal papers from your mortgage lender, you are not required to sign them right away. You have a time frame, usually around four months, before the renewal would take place. During this time, review your financial situation and take a look at current interest rates. You may find a new lender will be more helpful and allow you to find the right mortgage to suit your needs now. If you are making more money, you may want to consider a short term loan to pay off your home at a faster rate.
Short Term vs. Long Term
There are several strategies to owning a home and considering a mortgage. With a long term mortgage, you have a longer term to pay back the money which can be helpful when interest rates are low as your payment will be quite affordable each month. A short term loan can be used to pay the loan off quicker, if you have the funds to do so.
Speak with a mortgage lender to learn more about short vs long term mortgage and determine which option will work best for you. At Mortgage Guys, we can help you secure a mortgage renewal when you are in need of financial assistance. We work for you to find the best interest rates and loan terms. Contact our office today to learn more.