Can’t make your mortgage payment of time? Refinance it!

Suppose you have signed a interest only loan for the first 3 yrs and you live in Arizona. The payment has been difficult to make. You are thinking about refinancing early. And if you don’t you may have to sell my home due to a change in your family income. So do you have to pay some kind of penalty? Is there anyway out?

Now think like this, if the payment is difficult to make then how do you think you are going to afford a 30-yr fixed loan that isn’t interest only. If you are going to refinance then you should refinance into an Option ARM hybrid.

The negative is that there can be negative amortization at the end of 5 years if you continue to pay the minimum payment. It is generally recommended that you also send an extra 500-600 per month if you pay the minimum payment just so there is little to almost no negative amortization.

The other negative which can be a positive too is that there is closing costs and another appraisal that must be done on the property. Remember you can deduct the closing costs up to 65% but ask your tax advisor about that.
 
As far as prepay on penalty is concerned, you must look at the paperwork that was supplied to you at the table. There must be a prepay rider included and will say so at the top of the page. If you can’t find it then you have no prepay and you are set to go to refinance.

Look at your mortgage note and riders that you got at your closing. Look for the Prepayment Penalty (if you have one). Most Lenders do have one on their Loan Programs (unless you bought it out in your rate). That is one way for lenders to lock in a loan for a certain period of time. The percent will be on your note. So use a calculator online to find it out.


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